Class Notes for Framework for Marketing Management, 6th Edition
Stay ahead in class with Class Notes for Framework for Marketing Management, 6th Edition, an essential study resource.
Elizabeth Chen
Contributor
5.0
98
about 2 months ago
Preview (31 of 157)
Sign in to access the full document!
Preface
Just as A Framework for Marketing Management, 6th edition, is a shortened version of
Kotler/Keller’s Marketing Management, 15th edition, the Instructor’s Manual (IM) for A
Framework for Marketing Management, 6th edition, provides the essentials of the
Marketing Management, 15th edition, IM, including learning objectives, an executive
summary, suggested assignments and debates/discussion materials, and a chapter outline.
For the instructor teaching a survey marketing management course, or a substantially
abbreviated course, the Framework IM provides the basis for additional flexibility. For
example, if the course calls for the use of substantial case material, the Framework IM
provides the opportunity to select cases that complement each chapter. The Harvard
Business School Web site has a special section of recommended cases for a previous
edition that may be adapted to use with A Framework for Marketing.
https://cb.hbsp.harvard.edu/cbmp/resources/marketing/docs/MKT-Kotler-Keller.pdf
The Internet link for other cases is:
http://harvardbusinessonline.hbsp.harvard.edu
To summarize, the Framework IM is organized as follows:
• Learning/Teaching Objectives: Objectives that blend with and complement
the Kotler/Keller text learning objectives.
• Executive Summary: An executive summary from the chapter
• Assignments: Suggested assignments that align with the chapter content and
include related articles in some instances
• Chapter Outline: A detailed topic/sentence outline to provide an overall
framework to determine when and how to utilize the suggested lectures and/or
other support materials.
Just as A Framework for Marketing Management, 6th edition, is a shortened version of
Kotler/Keller’s Marketing Management, 15th edition, the Instructor’s Manual (IM) for A
Framework for Marketing Management, 6th edition, provides the essentials of the
Marketing Management, 15th edition, IM, including learning objectives, an executive
summary, suggested assignments and debates/discussion materials, and a chapter outline.
For the instructor teaching a survey marketing management course, or a substantially
abbreviated course, the Framework IM provides the basis for additional flexibility. For
example, if the course calls for the use of substantial case material, the Framework IM
provides the opportunity to select cases that complement each chapter. The Harvard
Business School Web site has a special section of recommended cases for a previous
edition that may be adapted to use with A Framework for Marketing.
https://cb.hbsp.harvard.edu/cbmp/resources/marketing/docs/MKT-Kotler-Keller.pdf
The Internet link for other cases is:
http://harvardbusinessonline.hbsp.harvard.edu
To summarize, the Framework IM is organized as follows:
• Learning/Teaching Objectives: Objectives that blend with and complement
the Kotler/Keller text learning objectives.
• Executive Summary: An executive summary from the chapter
• Assignments: Suggested assignments that align with the chapter content and
include related articles in some instances
• Chapter Outline: A detailed topic/sentence outline to provide an overall
framework to determine when and how to utilize the suggested lectures and/or
other support materials.
Preface
Just as A Framework for Marketing Management, 6th edition, is a shortened version of
Kotler/Keller’s Marketing Management, 15th edition, the Instructor’s Manual (IM) for A
Framework for Marketing Management, 6th edition, provides the essentials of the
Marketing Management, 15th edition, IM, including learning objectives, an executive
summary, suggested assignments and debates/discussion materials, and a chapter outline.
For the instructor teaching a survey marketing management course, or a substantially
abbreviated course, the Framework IM provides the basis for additional flexibility. For
example, if the course calls for the use of substantial case material, the Framework IM
provides the opportunity to select cases that complement each chapter. The Harvard
Business School Web site has a special section of recommended cases for a previous
edition that may be adapted to use with A Framework for Marketing.
https://cb.hbsp.harvard.edu/cbmp/resources/marketing/docs/MKT-Kotler-Keller.pdf
The Internet link for other cases is:
http://harvardbusinessonline.hbsp.harvard.edu
To summarize, the Framework IM is organized as follows:
• Learning/Teaching Objectives: Objectives that blend with and complement
the Kotler/Keller text learning objectives.
• Executive Summary: An executive summary from the chapter
• Assignments: Suggested assignments that align with the chapter content and
include related articles in some instances
• Chapter Outline: A detailed topic/sentence outline to provide an overall
framework to determine when and how to utilize the suggested lectures and/or
other support materials.
Just as A Framework for Marketing Management, 6th edition, is a shortened version of
Kotler/Keller’s Marketing Management, 15th edition, the Instructor’s Manual (IM) for A
Framework for Marketing Management, 6th edition, provides the essentials of the
Marketing Management, 15th edition, IM, including learning objectives, an executive
summary, suggested assignments and debates/discussion materials, and a chapter outline.
For the instructor teaching a survey marketing management course, or a substantially
abbreviated course, the Framework IM provides the basis for additional flexibility. For
example, if the course calls for the use of substantial case material, the Framework IM
provides the opportunity to select cases that complement each chapter. The Harvard
Business School Web site has a special section of recommended cases for a previous
edition that may be adapted to use with A Framework for Marketing.
https://cb.hbsp.harvard.edu/cbmp/resources/marketing/docs/MKT-Kotler-Keller.pdf
The Internet link for other cases is:
http://harvardbusinessonline.hbsp.harvard.edu
To summarize, the Framework IM is organized as follows:
• Learning/Teaching Objectives: Objectives that blend with and complement
the Kotler/Keller text learning objectives.
• Executive Summary: An executive summary from the chapter
• Assignments: Suggested assignments that align with the chapter content and
include related articles in some instances
• Chapter Outline: A detailed topic/sentence outline to provide an overall
framework to determine when and how to utilize the suggested lectures and/or
other support materials.
LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1. Why is marketing important?
2. What is the scope of marketing?
3. What are some core marketing concepts?
4. What forces are defining the new marketing realities?
5. What are the tasks necessary for successful marketing management?
EXECUTIVE SUMMARY
Marketing is the activity, set of institutions, and processes for creating, communicating,
and delivering value to customers and for managing customer relationships in ways that
benefit the organization and its stakeholders. Marketing management is the art and science of
choosing target markets and getting, keeping, and growing customers through creating,
delivering, and communicating superior customer value. Marketers can market goods,
services, events, experiences, persons, places, properties, organizations, information, and ideas
in four different marketplaces: consumer, business, global, and nonprofit.
Today’s marketplace is fundamentally different than in the past, resulting in many new
consumer and company capabilities. Technology, globalization, and social responsibility are
creating new opportunities and challenges and significantly changing the management or
marketing. Organizations can conduct business under the production concept, the product
concept, the selling concept, the marketing concept, or the holistic marketing concept. The
holistic marketing concept (including relationship marketing, integrated marketing, internal
marketing, and performance marketing) is based on the development, design, and
implementation of marketing programs, processes, and activities that recognize their breadth
and interdependencies. Successful marketing management includes developing marketing
strategies and plans, capturing marketing insights, connecting with customers, building strong
brands, creating, delivering, and communicating value, and managing the marketing
organization within the global economy.
OPENING THOUGHT
It is important to focus on how and why the traditional view of marketing has changed, and to
introduce the various ways of measuring performance, since they will reappear throughout the
text. Marketing applies to a variety of different areas and is increasingly involving many
levels of the organization. Students who are not marketing majors may have some difficulty
accepting the encompassing role that marketing has on the other functional disciplines within
C H A P T E R
1 DEFINING MARKETING
FOR THE NEW REALITIES
In this chapter, we will address the following questions:
1. Why is marketing important?
2. What is the scope of marketing?
3. What are some core marketing concepts?
4. What forces are defining the new marketing realities?
5. What are the tasks necessary for successful marketing management?
EXECUTIVE SUMMARY
Marketing is the activity, set of institutions, and processes for creating, communicating,
and delivering value to customers and for managing customer relationships in ways that
benefit the organization and its stakeholders. Marketing management is the art and science of
choosing target markets and getting, keeping, and growing customers through creating,
delivering, and communicating superior customer value. Marketers can market goods,
services, events, experiences, persons, places, properties, organizations, information, and ideas
in four different marketplaces: consumer, business, global, and nonprofit.
Today’s marketplace is fundamentally different than in the past, resulting in many new
consumer and company capabilities. Technology, globalization, and social responsibility are
creating new opportunities and challenges and significantly changing the management or
marketing. Organizations can conduct business under the production concept, the product
concept, the selling concept, the marketing concept, or the holistic marketing concept. The
holistic marketing concept (including relationship marketing, integrated marketing, internal
marketing, and performance marketing) is based on the development, design, and
implementation of marketing programs, processes, and activities that recognize their breadth
and interdependencies. Successful marketing management includes developing marketing
strategies and plans, capturing marketing insights, connecting with customers, building strong
brands, creating, delivering, and communicating value, and managing the marketing
organization within the global economy.
OPENING THOUGHT
It is important to focus on how and why the traditional view of marketing has changed, and to
introduce the various ways of measuring performance, since they will reappear throughout the
text. Marketing applies to a variety of different areas and is increasingly involving many
levels of the organization. Students who are not marketing majors may have some difficulty
accepting the encompassing role that marketing has on the other functional disciplines within
C H A P T E R
1 DEFINING MARKETING
FOR THE NEW REALITIES
a firm. For those students who have never been exposed to marketing and its components, the
instructor’s challenge is to educate the students about the world of marketing.
ASSIGNMENTS
In small groups, ask the students to review the annual report from Unilever. How do the
missions discussed in the opening vignette translate into their current business practices? How
are its marketing investments and initiatives affecting its profitability? What conclusions can
you draw from Unilever’s progress?
Students can choose a firm of their preference, interview key marketing management
members and ask the firm how they are reacting to the changes in marketing management for
the new realities.
Have the students read Adi Narayan’s “Marketers Aim New Ads at Video iPod Users,”
BloombergBusinessWeek April 17, 2014 (http://www.businessweek.com/articles/2014-04-
17/indias-mobile-marketers-try-phone-calls-to-reach-rural-consumers) and Suzanne Vranica
and Christopher S. Stewart’s “Mobile Advertising Begins to Take Off: Spending More Than
Doubled in the First Half,” Wall Street Journal, October 9, 2013 and comment on how
effective they believe cell phone advertisements will be in the future.
Have the students reflect upon their favorite product and/or service. Then have the students
collect marketing examples from each of these companies. This information should be in the
form of examples of printed advertising, copies of television commercials, Internet
advertising, or radio commercials. During class, have the students share what they have
collected with others. Questions to ask during the class discussion should focus on why this
particular example of advertising elicits a response from you. What do you like/dislike about
this marketing message? Does everyone in the class like/dislike this advertising?
DETAILED CHAPTER OUTLINE
Opening Vignette: Unilever is responding to the digital revolution and other major changes in
the business environment with a new marketing model that establishes social, economic, and
product missions for each brand. Examples of initiatives include halving its ecological
footprint while doubling revenues and drawing 70–75% of business from developing and
emerging markets by 2020. Marketing is both an art and a science, and results from careful
planning and execution using state-of-the art tools and techniques.
I. The Value of Marketing
A. Marketing ability helps create sufficient demand for products and services, which
is essential for a firm’s financial success, creates jobs and provides resources for
firms to engage is socially responsible activities.
B. Marketers that fail to carefully monitor their customers and competitors, continuously
improve their value offerings and marketing strategies, or satisfy their employees,
stockholders, suppliers, and channel partners in the process are more vulnerable to
competitive entry.
instructor’s challenge is to educate the students about the world of marketing.
ASSIGNMENTS
In small groups, ask the students to review the annual report from Unilever. How do the
missions discussed in the opening vignette translate into their current business practices? How
are its marketing investments and initiatives affecting its profitability? What conclusions can
you draw from Unilever’s progress?
Students can choose a firm of their preference, interview key marketing management
members and ask the firm how they are reacting to the changes in marketing management for
the new realities.
Have the students read Adi Narayan’s “Marketers Aim New Ads at Video iPod Users,”
BloombergBusinessWeek April 17, 2014 (http://www.businessweek.com/articles/2014-04-
17/indias-mobile-marketers-try-phone-calls-to-reach-rural-consumers) and Suzanne Vranica
and Christopher S. Stewart’s “Mobile Advertising Begins to Take Off: Spending More Than
Doubled in the First Half,” Wall Street Journal, October 9, 2013 and comment on how
effective they believe cell phone advertisements will be in the future.
Have the students reflect upon their favorite product and/or service. Then have the students
collect marketing examples from each of these companies. This information should be in the
form of examples of printed advertising, copies of television commercials, Internet
advertising, or radio commercials. During class, have the students share what they have
collected with others. Questions to ask during the class discussion should focus on why this
particular example of advertising elicits a response from you. What do you like/dislike about
this marketing message? Does everyone in the class like/dislike this advertising?
DETAILED CHAPTER OUTLINE
Opening Vignette: Unilever is responding to the digital revolution and other major changes in
the business environment with a new marketing model that establishes social, economic, and
product missions for each brand. Examples of initiatives include halving its ecological
footprint while doubling revenues and drawing 70–75% of business from developing and
emerging markets by 2020. Marketing is both an art and a science, and results from careful
planning and execution using state-of-the art tools and techniques.
I. The Value of Marketing
A. Marketing ability helps create sufficient demand for products and services, which
is essential for a firm’s financial success, creates jobs and provides resources for
firms to engage is socially responsible activities.
B. Marketers that fail to carefully monitor their customers and competitors, continuously
improve their value offerings and marketing strategies, or satisfy their employees,
stockholders, suppliers, and channel partners in the process are more vulnerable to
competitive entry.
Loading page 4...
II. The Scope of Marketing
A. What Is Marketing?
i. Marketing is about identifying and meeting human and social needs; “Meeting
needs profitably.”
ii. American Marketing Association definition: Marketing is the activity, set of
institutions, and processes for creating, communicating, delivering, and
exchanging offerings that have value for customers, clients, partners, and society
at large.
iii. Marketing management is the art and science of choosing target markets and
getting, keeping, and growing customers through creating, delivering, and
communicating superior customer value.
B. What Is Marketed?
i. Goods: physical goods include food products, cars, refrigerators, televisions,
machines, and other mainstays of a modern economy.
ii. Services: represent approximately 2/3 of the U.S. economy, including airlines,
hotels, maintenance and repair people, and accountants, bankers, doctors, and
management consultants.
iii. Events: include time-based events, global and local events.
iv. Experiences: marketers orchestrate several services and goods to create, stage, and
market experiences.
v. Persons: include artists, musicians, CEOs, physicians, high-profile lawyers and
financiers, and other professionals often get help from marketers, and each person
has been advised to become a “brand.”
vi. Places: include economic development specialists, real estate agents, commercial
banks, local business associations, and advertising and public relations agencies.
vii. Properties: intangible rights of ownership to either real property (real estate) or
financial property (stocks and bonds).
viii.Organizations: include museums, performing arts organizations, corporations, and
nonprofits that use marketing to boost their public images and compete for
audiences and funds.
ix. Information: what books, schools, and universities produce, market, and distribute
at a price to parents, students, and communities.
x. Ideas: every market offering includes a basic idea. Products and services are
platforms for delivering some idea or benefit.
C. Who Markets?
i. A marketer is someone who seeks a response—attention, a purchase, a vote, a
donation—from another party, called the prospect.
ii. Marketers manage all possible touch points where a customer interacts with the
company.
D. What Is a Market?
i. A market is a collection of buyers and sellers who transact over a particular
product or product class (such as the housing market or the grain market).
ii. Buyers and sellers are connected by four flows that include goods and services,
communication, money exchange, and information exchange.
III. Core Marketing Concepts
A. Needs, Wants, and Demands
A. What Is Marketing?
i. Marketing is about identifying and meeting human and social needs; “Meeting
needs profitably.”
ii. American Marketing Association definition: Marketing is the activity, set of
institutions, and processes for creating, communicating, delivering, and
exchanging offerings that have value for customers, clients, partners, and society
at large.
iii. Marketing management is the art and science of choosing target markets and
getting, keeping, and growing customers through creating, delivering, and
communicating superior customer value.
B. What Is Marketed?
i. Goods: physical goods include food products, cars, refrigerators, televisions,
machines, and other mainstays of a modern economy.
ii. Services: represent approximately 2/3 of the U.S. economy, including airlines,
hotels, maintenance and repair people, and accountants, bankers, doctors, and
management consultants.
iii. Events: include time-based events, global and local events.
iv. Experiences: marketers orchestrate several services and goods to create, stage, and
market experiences.
v. Persons: include artists, musicians, CEOs, physicians, high-profile lawyers and
financiers, and other professionals often get help from marketers, and each person
has been advised to become a “brand.”
vi. Places: include economic development specialists, real estate agents, commercial
banks, local business associations, and advertising and public relations agencies.
vii. Properties: intangible rights of ownership to either real property (real estate) or
financial property (stocks and bonds).
viii.Organizations: include museums, performing arts organizations, corporations, and
nonprofits that use marketing to boost their public images and compete for
audiences and funds.
ix. Information: what books, schools, and universities produce, market, and distribute
at a price to parents, students, and communities.
x. Ideas: every market offering includes a basic idea. Products and services are
platforms for delivering some idea or benefit.
C. Who Markets?
i. A marketer is someone who seeks a response—attention, a purchase, a vote, a
donation—from another party, called the prospect.
ii. Marketers manage all possible touch points where a customer interacts with the
company.
D. What Is a Market?
i. A market is a collection of buyers and sellers who transact over a particular
product or product class (such as the housing market or the grain market).
ii. Buyers and sellers are connected by four flows that include goods and services,
communication, money exchange, and information exchange.
III. Core Marketing Concepts
A. Needs, Wants, and Demands
Loading page 5...
i. Needs = basic human requirements
ii. Wants = when needs are directed to specific objects that might satisfy the need
iii. Demands = wants for specific products backed by an ability to pay
iv. Marketers do not create needs: Needs pre-exist marketers.
v. Five types of needs:
(1) Stated needs
(2) Real needs
(3) Unstated needs
(4) Delight needs
(5) Secret needs
B. Target Markets, Positioning, and Segmentation
i. For each target market, the firm develops a market offering that it positions in
target buyers’ minds as delivering some key benefit(s).
C. Offerings and Brands
i. A value proposition is a set of benefits that satisfy a consumer’s needs.
ii. The intangible value proposition is made physical by an offering, which can be a
combination of products, services, information, and experiences.
iii. A brand is an offering from a known source. All companies strive to build a brand
image with as many strong, favorable, and unique brand associations as possible.
D. Marketing Channels
i. Communication channels deliver and receive messages from target buyers.
ii. Distribution channels help display, sell, or deliver the physical product or
service(s) to the buyer or user.
iii. Service channels include warehouses, transportation companies, banks, and
insurance companies.
E. Paid, Owned, and Earned Media
i. Paid media allow marketers to show their ad or brand for a fee.
ii. Owned media are communication channels marketers actually own, like a
company or brand brochure, Web site, blog, Facebook page, or Twitter account.
iii. Earned media are streams in which consumers, the press, or other outsiders
voluntarily communicate something about the brand via word of mouth, buzz, or
viral marketing methods.
F. Impressions and Engagement
i. Marketers now think of three “screens” or means to reach consumers: TV,
Internet, and mobile.
ii. Impressions occur when consumers view a communication.
iii. Engagement is the extent of a customer’s attention and active involvement with a
communication.
G. Value and Satisfaction
i. Value is primarily a combination of quality, service, and price, called the customer
value triad. Value perceptions increase with quality and service but decrease with
price.
ii. Satisfaction reflects a person’s judgment of a product’s perceived performance in
relationship to expectations.
H. Supply Chain
ii. Wants = when needs are directed to specific objects that might satisfy the need
iii. Demands = wants for specific products backed by an ability to pay
iv. Marketers do not create needs: Needs pre-exist marketers.
v. Five types of needs:
(1) Stated needs
(2) Real needs
(3) Unstated needs
(4) Delight needs
(5) Secret needs
B. Target Markets, Positioning, and Segmentation
i. For each target market, the firm develops a market offering that it positions in
target buyers’ minds as delivering some key benefit(s).
C. Offerings and Brands
i. A value proposition is a set of benefits that satisfy a consumer’s needs.
ii. The intangible value proposition is made physical by an offering, which can be a
combination of products, services, information, and experiences.
iii. A brand is an offering from a known source. All companies strive to build a brand
image with as many strong, favorable, and unique brand associations as possible.
D. Marketing Channels
i. Communication channels deliver and receive messages from target buyers.
ii. Distribution channels help display, sell, or deliver the physical product or
service(s) to the buyer or user.
iii. Service channels include warehouses, transportation companies, banks, and
insurance companies.
E. Paid, Owned, and Earned Media
i. Paid media allow marketers to show their ad or brand for a fee.
ii. Owned media are communication channels marketers actually own, like a
company or brand brochure, Web site, blog, Facebook page, or Twitter account.
iii. Earned media are streams in which consumers, the press, or other outsiders
voluntarily communicate something about the brand via word of mouth, buzz, or
viral marketing methods.
F. Impressions and Engagement
i. Marketers now think of three “screens” or means to reach consumers: TV,
Internet, and mobile.
ii. Impressions occur when consumers view a communication.
iii. Engagement is the extent of a customer’s attention and active involvement with a
communication.
G. Value and Satisfaction
i. Value is primarily a combination of quality, service, and price, called the customer
value triad. Value perceptions increase with quality and service but decrease with
price.
ii. Satisfaction reflects a person’s judgment of a product’s perceived performance in
relationship to expectations.
H. Supply Chain
Loading page 6...
i. The supply chain is a channel stretching from raw materials to components to
finished products carried to final buyers.
ii. Each company in the chain captures only a certain percentage of the total value
generated by the supply chain’s value delivery system.
iii. When a company acquires competitors or expands upstream or downstream, its
aim is to capture a higher percentage of supply chain value.
I. Competition
i. Competition includes all the actual and potential rival offerings and substitutes a
buyer might consider.
J. Marketing Environment
i. Task environment includes the actors engaged in producing, distributing, and
promoting the offering.
ii. Broad environment consists of six components: demographic environment,
economic environment, social-cultural environment, natural environment,
technological environment, and political-legal environment.
IV. The New Marketing Realities
A. Technology
i. Widespread technology adoption has created new opportunities, promotes
shared information and customer relationship management.
B. Globalization
i. Transportation, shipping, and communication technologies have made it easier for
us to know the rest of the world, to travel, to buy and sell anywhere, and has made
countries increasingly multicultural.
C. Social Responsibility
i. The private sector is taking some responsibility for improving living conditions,
and firms all over the world have elevated the role of corporate social
responsibility.
D. A Dramatically Changed Marketplace
i. Technology, globalization, and social responsibility have changed the
marketplace.
ii. New capabilities in the changed marketplace include:
(1) Consumers can use the Internet as a powerful information and purchasing aid.
(2) Consumers can search, communicate, and purchase on the move.
(3) Consumers can tap into social media to share opinions and express loyalty.
(4) Consumers can actively interact with companies.
(5) Consumers can reject marketing they find inappropriate.
(6) Companies can use the Internet as a powerful information and sales channel,
including for individually differentiated goods.
(7) Companies can collect fuller and richer information about markets, customers,
prospects, and competitors.
(8) Companies can reach customers quickly and efficiently via social media and
mobile marketing, sending targeted ads, coupons, and information.
(9) Companies can improve purchasing, recruiting, training, and internal and
external communications.
(10) Companies can improve cost efficiency.
finished products carried to final buyers.
ii. Each company in the chain captures only a certain percentage of the total value
generated by the supply chain’s value delivery system.
iii. When a company acquires competitors or expands upstream or downstream, its
aim is to capture a higher percentage of supply chain value.
I. Competition
i. Competition includes all the actual and potential rival offerings and substitutes a
buyer might consider.
J. Marketing Environment
i. Task environment includes the actors engaged in producing, distributing, and
promoting the offering.
ii. Broad environment consists of six components: demographic environment,
economic environment, social-cultural environment, natural environment,
technological environment, and political-legal environment.
IV. The New Marketing Realities
A. Technology
i. Widespread technology adoption has created new opportunities, promotes
shared information and customer relationship management.
B. Globalization
i. Transportation, shipping, and communication technologies have made it easier for
us to know the rest of the world, to travel, to buy and sell anywhere, and has made
countries increasingly multicultural.
C. Social Responsibility
i. The private sector is taking some responsibility for improving living conditions,
and firms all over the world have elevated the role of corporate social
responsibility.
D. A Dramatically Changed Marketplace
i. Technology, globalization, and social responsibility have changed the
marketplace.
ii. New capabilities in the changed marketplace include:
(1) Consumers can use the Internet as a powerful information and purchasing aid.
(2) Consumers can search, communicate, and purchase on the move.
(3) Consumers can tap into social media to share opinions and express loyalty.
(4) Consumers can actively interact with companies.
(5) Consumers can reject marketing they find inappropriate.
(6) Companies can use the Internet as a powerful information and sales channel,
including for individually differentiated goods.
(7) Companies can collect fuller and richer information about markets, customers,
prospects, and competitors.
(8) Companies can reach customers quickly and efficiently via social media and
mobile marketing, sending targeted ads, coupons, and information.
(9) Companies can improve purchasing, recruiting, training, and internal and
external communications.
(10) Companies can improve cost efficiency.
Loading page 7...
iii. Retail transformation: increased competition from a variety of formats has yielded
more entertaining retail experiences.
iv. Disintermediation: delivery of products and services by intervening in the
traditional flow of goods.
v. Reintermediation: traditional companies are adding online services to their
offerings.
vi. Heightened global competition, rise of private labels and mega-brands.
vii. Marketers are increasingly asked to justify their investments in financial and
profitability terms, as well as in terms of building the brand and growing the
customer base.
V. Company Orientation Toward the Marketplace
A. The Production Concept
i. Suggests consumers prefer products that are widely available and inexpensive, so
management aims for high production efficiency, low costs, and mass distribution.
B. The Product Concept
i. Proposes consumers favor products offering the most quality, performance, or
innovative features, so management may commit the “better-mousetrap” fallacy,
believing a better product will by itself lead people to beat a path to their door.
C. The Selling Concept
i. Consumers and businesses, if left alone, won’t buy enough of the organization’s
products. It is practiced most aggressively with unsought goods—goods buyers
don’t normally think of buying such as insurance and cemetery plots—and when
firms with overcapacity aim to sell what they make, rather than make what the
market wants.
D. The Marketing Concept
i. Find the right products for your customers. The marketing concept holds that the
key to achieving organizational goals is being more effective than competitors in
creating, delivering, and communicating superior customer value to your target
markets.
E. The Holistic Marketing Concept
i. Based on the development, design, and implementation of marketing programs,
processes, and activities that recognize their breadth and interdependencies.
ii. Relationship Marketing
(1) Aims to build mutually satisfying long-term relationships with key
constituents in order to earn and retain their business.
(2) Four key constituents for relationship marketing are customers, employees,
marketing partners (channels, suppliers, distributors, dealers, agencies), and
members of the financial community (shareholders, investors, analysts).
(3) The ultimate outcome of relationship marketing is a unique company asset
called a marketing network consisting of the company and its supporting
stakeholders—customers, employees, suppliers, distributors, retailers, and
others—with whom it has built mutually profitable business relationships.
iii. Integrated Marketing
(1) Many different marketing activities can create, communicate, and deliver
value.
more entertaining retail experiences.
iv. Disintermediation: delivery of products and services by intervening in the
traditional flow of goods.
v. Reintermediation: traditional companies are adding online services to their
offerings.
vi. Heightened global competition, rise of private labels and mega-brands.
vii. Marketers are increasingly asked to justify their investments in financial and
profitability terms, as well as in terms of building the brand and growing the
customer base.
V. Company Orientation Toward the Marketplace
A. The Production Concept
i. Suggests consumers prefer products that are widely available and inexpensive, so
management aims for high production efficiency, low costs, and mass distribution.
B. The Product Concept
i. Proposes consumers favor products offering the most quality, performance, or
innovative features, so management may commit the “better-mousetrap” fallacy,
believing a better product will by itself lead people to beat a path to their door.
C. The Selling Concept
i. Consumers and businesses, if left alone, won’t buy enough of the organization’s
products. It is practiced most aggressively with unsought goods—goods buyers
don’t normally think of buying such as insurance and cemetery plots—and when
firms with overcapacity aim to sell what they make, rather than make what the
market wants.
D. The Marketing Concept
i. Find the right products for your customers. The marketing concept holds that the
key to achieving organizational goals is being more effective than competitors in
creating, delivering, and communicating superior customer value to your target
markets.
E. The Holistic Marketing Concept
i. Based on the development, design, and implementation of marketing programs,
processes, and activities that recognize their breadth and interdependencies.
ii. Relationship Marketing
(1) Aims to build mutually satisfying long-term relationships with key
constituents in order to earn and retain their business.
(2) Four key constituents for relationship marketing are customers, employees,
marketing partners (channels, suppliers, distributors, dealers, agencies), and
members of the financial community (shareholders, investors, analysts).
(3) The ultimate outcome of relationship marketing is a unique company asset
called a marketing network consisting of the company and its supporting
stakeholders—customers, employees, suppliers, distributors, retailers, and
others—with whom it has built mutually profitable business relationships.
iii. Integrated Marketing
(1) Many different marketing activities can create, communicate, and deliver
value.
Loading page 8...
(2) Marketers should design and implement any one marketing activity with all
other activities in mind.
(3) The company must develop an integrated channel strategy.
(4) The company must integrate communications to they reinforce and
complement each other.
iv. Internal Marketing
(1) Hiring, training, and motivating able employees who want to serve customers
well.
(2) Marketing succeeds only when all departments work together to achieve
customer goals.
v. Performance Marketing
(1) Requires understanding the financial and nonfinancial returns to business and
society from marketing activities and programs.
VI. Updating The Four Ps
A. The original four Ps: product, price, place and promotion
B. Modern marketing realities suggest a more representative set that encompasses
modern marketing realities: people, processes, programs and performance.
i. People: reflects internal marketing and the fact that employees and understanding
consumers’ whole lives are critical to marketing success.
ii. Processes: reflects all the creativity, discipline, and structure brought to marketing
management.
iii. Programs: reflects all the firm’s consumer-directed activities.
iv. Performance: captures the range of possible outcome measures that have financial
and nonfinancial implications (profitability as well as brand and customer equity)
and implications beyond the company itself (social responsibility, legal, ethical,
and community related).
VII. Marketing Management Tasks
A. Developing and implementing marketing strategies and plans: identify potential long-
run opportunities, given its market experience and core competencies.
B. Capturing marketing insights.
C. Connecting with customers.
D. Building strong brands.
E. Creating value: Differentiate the service of product (the tangible offering to the
market, which includes the product quality, design, features, and packaging) to gain a
competitive advantage.
F. Delivering value.
G. Communicating value.
H. Managing the marketing organization.
other activities in mind.
(3) The company must develop an integrated channel strategy.
(4) The company must integrate communications to they reinforce and
complement each other.
iv. Internal Marketing
(1) Hiring, training, and motivating able employees who want to serve customers
well.
(2) Marketing succeeds only when all departments work together to achieve
customer goals.
v. Performance Marketing
(1) Requires understanding the financial and nonfinancial returns to business and
society from marketing activities and programs.
VI. Updating The Four Ps
A. The original four Ps: product, price, place and promotion
B. Modern marketing realities suggest a more representative set that encompasses
modern marketing realities: people, processes, programs and performance.
i. People: reflects internal marketing and the fact that employees and understanding
consumers’ whole lives are critical to marketing success.
ii. Processes: reflects all the creativity, discipline, and structure brought to marketing
management.
iii. Programs: reflects all the firm’s consumer-directed activities.
iv. Performance: captures the range of possible outcome measures that have financial
and nonfinancial implications (profitability as well as brand and customer equity)
and implications beyond the company itself (social responsibility, legal, ethical,
and community related).
VII. Marketing Management Tasks
A. Developing and implementing marketing strategies and plans: identify potential long-
run opportunities, given its market experience and core competencies.
B. Capturing marketing insights.
C. Connecting with customers.
D. Building strong brands.
E. Creating value: Differentiate the service of product (the tangible offering to the
market, which includes the product quality, design, features, and packaging) to gain a
competitive advantage.
F. Delivering value.
G. Communicating value.
H. Managing the marketing organization.
Loading page 9...
LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1. How does marketing affect customer value?
2. How is strategic planning carried out at different organizational levels?
3. What does a marketing plan include?
4. How can companies monitor and improve marketing activities and performance?
CHAPTER SUMMARY
The value chain is a tool for identifying key activities that create customer value
and costs in a specific business. The value delivery process includes choosing (or
identifying), providing (or delivering), and communicating superior value. Market-
oriented strategic planning is the managerial process of developing and maintaining a
viable fit between the organization’s objectives, skills, and resources and its changing
market opportunities.
Strategic planning occurs at multiple levels: corporate, division, business unit, and
product. Corporate strategy includes defining the mission, establishing strategic business
units (SBUs), assigning resources, and assessing growth opportunities. This is the
framework within which divisions and SBUs prepare their strategic plans. The marketing
plan summarizes what the firm knows about the marketplace and how well it will reach
its marketing objectives, operating at both the strategic and tactical levels. Marketing
implementation turns marketing plans into action assignments to achieve the plan’s
objectives. Firms use marketing metrics, marketing-mix modelling, and marketing
dashboards to monitor and assess marketing productivity. By applying marketing
control, management can assess the effects of marketing activities and make
improvements.
OPENING THOUGHT
This introduces several perspectives on planning and describes how to draw up a formal
marketing plan. The formal marketing plan sample is an excellent resource because it
provides an overview of the types of decisions a marketer might make in an effort to
create customer value. Provide sufficient class time covering the distinctions between
strategy and tactics.
C H A P T E R
2 DEVELOPING AND
IMPLEMENTING
MARKETING STRATEGIES
AND PLANS
In this chapter, we will address the following questions:
1. How does marketing affect customer value?
2. How is strategic planning carried out at different organizational levels?
3. What does a marketing plan include?
4. How can companies monitor and improve marketing activities and performance?
CHAPTER SUMMARY
The value chain is a tool for identifying key activities that create customer value
and costs in a specific business. The value delivery process includes choosing (or
identifying), providing (or delivering), and communicating superior value. Market-
oriented strategic planning is the managerial process of developing and maintaining a
viable fit between the organization’s objectives, skills, and resources and its changing
market opportunities.
Strategic planning occurs at multiple levels: corporate, division, business unit, and
product. Corporate strategy includes defining the mission, establishing strategic business
units (SBUs), assigning resources, and assessing growth opportunities. This is the
framework within which divisions and SBUs prepare their strategic plans. The marketing
plan summarizes what the firm knows about the marketplace and how well it will reach
its marketing objectives, operating at both the strategic and tactical levels. Marketing
implementation turns marketing plans into action assignments to achieve the plan’s
objectives. Firms use marketing metrics, marketing-mix modelling, and marketing
dashboards to monitor and assess marketing productivity. By applying marketing
control, management can assess the effects of marketing activities and make
improvements.
OPENING THOUGHT
This introduces several perspectives on planning and describes how to draw up a formal
marketing plan. The formal marketing plan sample is an excellent resource because it
provides an overview of the types of decisions a marketer might make in an effort to
create customer value. Provide sufficient class time covering the distinctions between
strategy and tactics.
C H A P T E R
2 DEVELOPING AND
IMPLEMENTING
MARKETING STRATEGIES
AND PLANS
Loading page 10...
ASSIGNMENTS
Students should be encouraged to review selected companies’ annual reports to collect from
these reports the corporations’ mission statements, strategy statements, and target market
definitions. The collected material can be discussed in class comparing the company’s overall
business, marketing, and customer strategies.
Each student is in effect a “product.” Like all products you (they) must be marketed for
success. Have each of your students’ write their own “mission statement” about their career
and a “goal statement” of where they see themselves in 5 years, 10 years, and after 20 years.
Select a local firm or have the students select firms in which they are familiar (current
employers or past employers, for example) and have them answer the questions posed by the
Marketing Memo, Marketing Plan Criteria regarding the evaluation of a marketing plan. Make
sure the students are specific in their answers.
Students should be encouraged to review selected companies’ annual reports to collect from
these reports the corporations’ mission statements, strategy statements, and target market
definitions. The collected material can be discussed in class comparing the company’s overall
business, marketing, and customer strategies.
Each student is in effect a “product.” Like all products you (they) must be marketed for
success. Have each of your students’ write their own “mission statement” about their career
and a “goal statement” of where they see themselves in 5 years, 10 years, and after 20 years.
Select a local firm or have the students select firms in which they are familiar (current
employers or past employers, for example) and have them answer the questions posed by the
Marketing Memo, Marketing Plan Criteria regarding the evaluation of a marketing plan. Make
sure the students are specific in their answers.
Loading page 11...
DETAILED CHAPTER OUTLINE
Opening Vignette: Hewlett-Packard has been challenged in recent years, and is an
example of how firms must constantly improve their strategies to adjust to changes in the
marketplace.
I. Marketing and Customer Value
A. The Value Delivery Process
i. The traditional view of marketing where a firm makes something and
sells it only applies in economies with goods shortages
ii. Marketing is placed at the beginning of business planning in
economies with different consumer needs and wants
iii. Three phases to the value creation and delivery sequence:
1. Choosing the value: homework; market segmentation, target
market selection, value positioning
2. Providing the value: identification of features, prices,
distribution
3. Communicating the value: use the Internet, advertising, sales
force and other communication tools
B. The Value Chain
i. Every firm is a synthesis of activities performed to design, produce,
market, deliver and support its product.
ii. Primary activities
1. Inbound logistics: bringing materials into the business
2. Operations: converting materials into final products
3. Outbound logistics: shipping out final products
4. Marketing (includes sales)
5. Service
iii. Support activities
1. Procurement
2. Technology development
3. Human resource management
4. Firm infrastructure
iv. Firms examine costs and performance in each value-creating activity
and benchmark against competitors to look for ways to improve
v. Core business processes (increasingly reengineered and assigned
cross-functional teams):
1. The market-sensing process: gathering and acting upon
information about the product
2. The new-offering realization process: researching, developing,
and launching new high-quality offerings quickly and within
budget
3. The customer acquisition process: defining target markets and
prospecting for new customers
4. The customer relationship management process: building
Opening Vignette: Hewlett-Packard has been challenged in recent years, and is an
example of how firms must constantly improve their strategies to adjust to changes in the
marketplace.
I. Marketing and Customer Value
A. The Value Delivery Process
i. The traditional view of marketing where a firm makes something and
sells it only applies in economies with goods shortages
ii. Marketing is placed at the beginning of business planning in
economies with different consumer needs and wants
iii. Three phases to the value creation and delivery sequence:
1. Choosing the value: homework; market segmentation, target
market selection, value positioning
2. Providing the value: identification of features, prices,
distribution
3. Communicating the value: use the Internet, advertising, sales
force and other communication tools
B. The Value Chain
i. Every firm is a synthesis of activities performed to design, produce,
market, deliver and support its product.
ii. Primary activities
1. Inbound logistics: bringing materials into the business
2. Operations: converting materials into final products
3. Outbound logistics: shipping out final products
4. Marketing (includes sales)
5. Service
iii. Support activities
1. Procurement
2. Technology development
3. Human resource management
4. Firm infrastructure
iv. Firms examine costs and performance in each value-creating activity
and benchmark against competitors to look for ways to improve
v. Core business processes (increasingly reengineered and assigned
cross-functional teams):
1. The market-sensing process: gathering and acting upon
information about the product
2. The new-offering realization process: researching, developing,
and launching new high-quality offerings quickly and within
budget
3. The customer acquisition process: defining target markets and
prospecting for new customers
4. The customer relationship management process: building
Loading page 12...
deeper understanding, relationships, and offerings to individual
customers
vi. Companies often partner with specific suppliers and distributors to
create a superior value delivery network, or supply chain
C. Core Competencies
i. Three characteristics
1. Sources of competitive advantage that make a significant
contribution to perceived customer benefits
2. Have applications to a wide variety of markets
3. Are difficult for competitors imitate
ii. Accompanied by distinctive capabilities, or excellence in broader
business processes: market sensing, customer linking, channel
bonding
D. The Central Role of Strategic Planning
i. Marketers must prioritize strategic planning in three key areas
1. Managing the businesses as an investment portfolio
2. Assessing the market’s growth rate and the company’s position
in that market
3. Establishing a strategy
ii. A marketing plan operates on a strategic level and a tactical level
1. The strategic marketing plan lays out the target markets and the
firm’s value proposition, based on an analysis of the best
market opportunities.
2. The tactical marketing plan specifies the marketing tactics,
including product features, promotion, merchandising, pricing,
sales channels, and service.
II. Corporate and Division Strategic Planning
A. Corporate headquarters undertake four planning activities
i. Define the corporate mission
ii. Establish strategic business units
iii. Assign resources to each strategic business unit
iv. Assess growth opportunities
B. Defining the Corporate Mission
i. Over time, the mission may change to respond to new opportunities or
market conditions
ii. Classic questions: What is our business? Who is the customer? What
is of value to the customer? What will our business be? What should
our business be?
iii. Clear, thoughtful mission statements are developed collaboratively
with and shared with managers, employees, and often customers
1. Provides a shared sense of purpose, direction, and opportunity
2. Good mission statements focus on a limited number of goals.
stress the company’s major policies and values, define the
major competitive spheres within which the company will
operate, take a long-term view, and are short, memorable and
meaningful
C. Establishing Strategic Business Units
i. Established using three characteristics
customers
vi. Companies often partner with specific suppliers and distributors to
create a superior value delivery network, or supply chain
C. Core Competencies
i. Three characteristics
1. Sources of competitive advantage that make a significant
contribution to perceived customer benefits
2. Have applications to a wide variety of markets
3. Are difficult for competitors imitate
ii. Accompanied by distinctive capabilities, or excellence in broader
business processes: market sensing, customer linking, channel
bonding
D. The Central Role of Strategic Planning
i. Marketers must prioritize strategic planning in three key areas
1. Managing the businesses as an investment portfolio
2. Assessing the market’s growth rate and the company’s position
in that market
3. Establishing a strategy
ii. A marketing plan operates on a strategic level and a tactical level
1. The strategic marketing plan lays out the target markets and the
firm’s value proposition, based on an analysis of the best
market opportunities.
2. The tactical marketing plan specifies the marketing tactics,
including product features, promotion, merchandising, pricing,
sales channels, and service.
II. Corporate and Division Strategic Planning
A. Corporate headquarters undertake four planning activities
i. Define the corporate mission
ii. Establish strategic business units
iii. Assign resources to each strategic business unit
iv. Assess growth opportunities
B. Defining the Corporate Mission
i. Over time, the mission may change to respond to new opportunities or
market conditions
ii. Classic questions: What is our business? Who is the customer? What
is of value to the customer? What will our business be? What should
our business be?
iii. Clear, thoughtful mission statements are developed collaboratively
with and shared with managers, employees, and often customers
1. Provides a shared sense of purpose, direction, and opportunity
2. Good mission statements focus on a limited number of goals.
stress the company’s major policies and values, define the
major competitive spheres within which the company will
operate, take a long-term view, and are short, memorable and
meaningful
C. Establishing Strategic Business Units
i. Established using three characteristics
Loading page 13...
1. Single business or collection of related businesses that can be
planned separately from the rest of the company
2. Own set of competitors
3. Manager responsible for strategic planning and profit
performance and controls most factors affecting profit
D. Assigning Resources to Each SBU
i. Resources assigned using shareholder value analysis; value assessed
on potential of business based on growth opportunities from global
expansion, positioning or retargeting and strategic outsourcing
E. Assessing Growth Opportunities
i. Intensive growth: within current businesses; product-market expansion
grid is helpful
1. Market-penetration strategy: more market share with current
products in current markets
2. Market-development strategy: develop new markets for current
products
3. Product-development strategy: develop new products for
current markets
4. Diversification strategy: develop new products for new markets
ii. Integrative growth: acquire related businesses
1. Use backward, forward or horizontal integrations within the
industry
2. May not reach desired sales volume; challenges with
integration
iii. Diversification growth: identify opportunities for growth from adding
attractive, unrelated businesses
iv. Downsize or divest older businesses: Prune, harvest or divest to
release resources or reduce costs
F. Organization and Organizational Culture
i. A company’s organization is its structures, policies, and corporate
culture, all of which can become dysfunctional in a rapidly changing
business environment.
ii. Corporate culture is “the shared experiences, stories, beliefs, and
norms that characterize an organization.”
iii. Scenario analysis develops plausible representations of a firm’s
possible future using assumptions about forces driving the market and
uncertainties
III. Business Unit Strategic Planning
A. The Business Mission
i. Develop a specific mission for the strategic business unit
B. SWOT Analysis
i. External Environment (Opportunity and Threat) Analysis: monitor key
macroenvironmental forces
1. Opportunity: area of buyer need and interest that a company
has a high probability of satisfying
a. Offer something in short supply
b. Supply existing product or service in a superior way
i. Problem detection: ask consumers for
planned separately from the rest of the company
2. Own set of competitors
3. Manager responsible for strategic planning and profit
performance and controls most factors affecting profit
D. Assigning Resources to Each SBU
i. Resources assigned using shareholder value analysis; value assessed
on potential of business based on growth opportunities from global
expansion, positioning or retargeting and strategic outsourcing
E. Assessing Growth Opportunities
i. Intensive growth: within current businesses; product-market expansion
grid is helpful
1. Market-penetration strategy: more market share with current
products in current markets
2. Market-development strategy: develop new markets for current
products
3. Product-development strategy: develop new products for
current markets
4. Diversification strategy: develop new products for new markets
ii. Integrative growth: acquire related businesses
1. Use backward, forward or horizontal integrations within the
industry
2. May not reach desired sales volume; challenges with
integration
iii. Diversification growth: identify opportunities for growth from adding
attractive, unrelated businesses
iv. Downsize or divest older businesses: Prune, harvest or divest to
release resources or reduce costs
F. Organization and Organizational Culture
i. A company’s organization is its structures, policies, and corporate
culture, all of which can become dysfunctional in a rapidly changing
business environment.
ii. Corporate culture is “the shared experiences, stories, beliefs, and
norms that characterize an organization.”
iii. Scenario analysis develops plausible representations of a firm’s
possible future using assumptions about forces driving the market and
uncertainties
III. Business Unit Strategic Planning
A. The Business Mission
i. Develop a specific mission for the strategic business unit
B. SWOT Analysis
i. External Environment (Opportunity and Threat) Analysis: monitor key
macroenvironmental forces
1. Opportunity: area of buyer need and interest that a company
has a high probability of satisfying
a. Offer something in short supply
b. Supply existing product or service in a superior way
i. Problem detection: ask consumers for
Loading page 14...
suggestions
ii. Ideal method: ask consumers to imagine an
ideal version of the product or service
iii. Consumption chain method: chart steps in
acquiring, using, disposing of product
c. Above methods lead to new product or service
2. Benefit from converging industry trends/introduce hybrid
products or services to the market
3. Make buying process more convenient or efficient
4. Meet the need for more information and advice
5. Customize a product or service
6. Introduce a new capability
7. Deliver a product or service faster
8. Offer product at a much lower price
ii. Market opportunity analysis (MOA) questions
1. Can we articulate the benefits convincingly to the defined
target market(s)?
2. Can we locate the target market(s) and reach them with cost-
effective media and trade channels?
3. Does our company possess or have access to the critical
capabilities and resources we need to deliver the customer
benefits?
4. Can we deliver the benefits better than any actual or potential
competitors?
5. Will the financial rate of return meet or exceed our required
threshold for investment?
iii. Environmental threat is a challenge posed by an unfavorable trend or
development that, in the absence of defensive marketing action, would
lead to lower sales.
iv. Internal Environment (Strengths and Weaknesses) Analysis
C. Goal Formulation
i. Goals are objectives that are specific with respect to magnitude and
time
ii. Management by objectives meets four criteria
1. They must be arranged hierarchically, from most to least
important
2. Objectives should be quantitative whenever possible
3. Goals should be realistic
4. Objectives must be consistent
iii. Trade-offs include short-term profit versus long-term growth, deep
penetration of existing markets versus development of new markets,
profit goals versus nonprofit goals, and high growth versus low risk.
D. Strategy Formulation
i. Strategy is a game plan for getting what you want to achieve
ii. Porter’s generic strategies
1. Overall cost leadership
2. Differentiation
3. Focus
ii. Ideal method: ask consumers to imagine an
ideal version of the product or service
iii. Consumption chain method: chart steps in
acquiring, using, disposing of product
c. Above methods lead to new product or service
2. Benefit from converging industry trends/introduce hybrid
products or services to the market
3. Make buying process more convenient or efficient
4. Meet the need for more information and advice
5. Customize a product or service
6. Introduce a new capability
7. Deliver a product or service faster
8. Offer product at a much lower price
ii. Market opportunity analysis (MOA) questions
1. Can we articulate the benefits convincingly to the defined
target market(s)?
2. Can we locate the target market(s) and reach them with cost-
effective media and trade channels?
3. Does our company possess or have access to the critical
capabilities and resources we need to deliver the customer
benefits?
4. Can we deliver the benefits better than any actual or potential
competitors?
5. Will the financial rate of return meet or exceed our required
threshold for investment?
iii. Environmental threat is a challenge posed by an unfavorable trend or
development that, in the absence of defensive marketing action, would
lead to lower sales.
iv. Internal Environment (Strengths and Weaknesses) Analysis
C. Goal Formulation
i. Goals are objectives that are specific with respect to magnitude and
time
ii. Management by objectives meets four criteria
1. They must be arranged hierarchically, from most to least
important
2. Objectives should be quantitative whenever possible
3. Goals should be realistic
4. Objectives must be consistent
iii. Trade-offs include short-term profit versus long-term growth, deep
penetration of existing markets versus development of new markets,
profit goals versus nonprofit goals, and high growth versus low risk.
D. Strategy Formulation
i. Strategy is a game plan for getting what you want to achieve
ii. Porter’s generic strategies
1. Overall cost leadership
2. Differentiation
3. Focus
Loading page 15...
iii. Competing firms directing the same strategy to the same target market
constitute a strategic group
iv. There is a distinction between operational effectiveness and strategy:
operationally effectiveness can be copied; strategy develops a unique
and valuable position
v. Strategic alliances complement a firm’s capabilities and resources
1. Product or service alliances
2. Promotional alliances
3. Logistics alliances
4. Pricing alliances
vi. Firms use partner relationship management to form and manage
partnerships
E. Strategy and Implementation
i. Strategy addresses the what and why of marketing programs and
activities
ii. Implementation addresses the who, where, when and how of
marketing programs and activities
iii. Strategy is one of seven elements of business success:
1. Hardware: strategy, structure, and systems
2. Software: style, skills, staff and shared values
IV. The Marketing Plan
A. A marketing plan is a written document that summarizes what the marketer
has learned about the marketplace and indicates how the firm plans to meet its
marketing objectives
B. The most frequently cited shortcomings of current marketing plans, according
to marketing executives, are lack of realism, insufficient competitive analysis,
and a short-run focus
C. Contents of a Marketing Plan
i. Executive summary and table of contents
ii. Situation analysis (relevant background data on sales, costs, the
market, competitors and the macroenvironment)
iii. Marketing strategy (mission, marketing and financial objectives, needs
the marketing offering is intended to satisfy and its competitive
positioning)
iv. Marketing tactics (marketing activities that will be undertaken to
execute the marketing strategy)
v. Financial projections include a sales forecast, an expense forecast, and
a break-even analysis.
vi. Implementation controls: outlines the controls for monitoring and
adjusting implementation; spells out the goals and budget for each
month or quarter so management can review results and take
corrective action as needed.
D. From Marketing Plan to Marketing Action
V. Marketing Implementation, Control, and Performance
A. Marketing implementation is the process that turns marketing plans into action
assignments and ensures they accomplish the plan’s stated objectives
i. Schedules show when tasks were supposed to be completed vs. when
they actually were
constitute a strategic group
iv. There is a distinction between operational effectiveness and strategy:
operationally effectiveness can be copied; strategy develops a unique
and valuable position
v. Strategic alliances complement a firm’s capabilities and resources
1. Product or service alliances
2. Promotional alliances
3. Logistics alliances
4. Pricing alliances
vi. Firms use partner relationship management to form and manage
partnerships
E. Strategy and Implementation
i. Strategy addresses the what and why of marketing programs and
activities
ii. Implementation addresses the who, where, when and how of
marketing programs and activities
iii. Strategy is one of seven elements of business success:
1. Hardware: strategy, structure, and systems
2. Software: style, skills, staff and shared values
IV. The Marketing Plan
A. A marketing plan is a written document that summarizes what the marketer
has learned about the marketplace and indicates how the firm plans to meet its
marketing objectives
B. The most frequently cited shortcomings of current marketing plans, according
to marketing executives, are lack of realism, insufficient competitive analysis,
and a short-run focus
C. Contents of a Marketing Plan
i. Executive summary and table of contents
ii. Situation analysis (relevant background data on sales, costs, the
market, competitors and the macroenvironment)
iii. Marketing strategy (mission, marketing and financial objectives, needs
the marketing offering is intended to satisfy and its competitive
positioning)
iv. Marketing tactics (marketing activities that will be undertaken to
execute the marketing strategy)
v. Financial projections include a sales forecast, an expense forecast, and
a break-even analysis.
vi. Implementation controls: outlines the controls for monitoring and
adjusting implementation; spells out the goals and budget for each
month or quarter so management can review results and take
corrective action as needed.
D. From Marketing Plan to Marketing Action
V. Marketing Implementation, Control, and Performance
A. Marketing implementation is the process that turns marketing plans into action
assignments and ensures they accomplish the plan’s stated objectives
i. Schedules show when tasks were supposed to be completed vs. when
they actually were
Loading page 16...
ii. Metrics track actual outcomes of marketing programs to see whether
the company is moving towards its objectives
iii. Two complementary approaches to measure marketing productivity
are:
1. Marketing metrics – assess marketing effects
2. Marketing-mix modeling – estimate causal relationships and
measure how marketing activity affects outcomes
iv. Marketing dashboards are structured to disseminate insights from these
two approaches
B. Marketing Metrics
i. Set of measures that help marketers quantify, compare and interpret
their performance
ii. Short-term results often reflect profit-and-loss concerns as shown by
sales turnover, shareholder value, or a combination
iii. Brand-equity measures include customer awareness, attitudes,
behaviors, market share, relative price premium, number of
complaints, distribution and availability, total number of customers,
perceived quality, and loyalty and retention
C. Marketing-Mix Modeling
i. Marking-mix models analyze data from a variety of sources
ii. They help isolate effects, but are less effective at assessing how
marketing elements work in combination
1. Focused on incremental growth instead of baseline sales or
long-term effects
2. Limited integration of metrics related to customer satisfaction,
awareness and brand equity
3. Fails to incorporate metrics related to competitors, trade or
sales force
D. Marketing Dashboards
i. A concise set of interconnected performance drivers to be viewed in
common throughout the organization
ii. Customer-performance scorecard: how well the company is doing on
customer-based measures
iii. Stakeholder-performance scorecard: the satisfaction of various
constituencies who have a critical interest in and impact on the
company’s performance
E. Marketing Control
i. Annual-plan control ensures the company achieves sales, profits and
other goals established in its annual plan
ii. Profitability control determines whether to expand, reduce, or
eliminate any products or marketing activities
iii. Efficiency control helps the company look at better ways to manage
marketing spending and investments
iv. Strategic control periodically reassesses the strategic approach to the
marketplace using a marketing audit, which covers the
macroenvironment, task environment, marketing strategy, marketing
organization, marketing systems, marketing productivity, and
marketing functions
the company is moving towards its objectives
iii. Two complementary approaches to measure marketing productivity
are:
1. Marketing metrics – assess marketing effects
2. Marketing-mix modeling – estimate causal relationships and
measure how marketing activity affects outcomes
iv. Marketing dashboards are structured to disseminate insights from these
two approaches
B. Marketing Metrics
i. Set of measures that help marketers quantify, compare and interpret
their performance
ii. Short-term results often reflect profit-and-loss concerns as shown by
sales turnover, shareholder value, or a combination
iii. Brand-equity measures include customer awareness, attitudes,
behaviors, market share, relative price premium, number of
complaints, distribution and availability, total number of customers,
perceived quality, and loyalty and retention
C. Marketing-Mix Modeling
i. Marking-mix models analyze data from a variety of sources
ii. They help isolate effects, but are less effective at assessing how
marketing elements work in combination
1. Focused on incremental growth instead of baseline sales or
long-term effects
2. Limited integration of metrics related to customer satisfaction,
awareness and brand equity
3. Fails to incorporate metrics related to competitors, trade or
sales force
D. Marketing Dashboards
i. A concise set of interconnected performance drivers to be viewed in
common throughout the organization
ii. Customer-performance scorecard: how well the company is doing on
customer-based measures
iii. Stakeholder-performance scorecard: the satisfaction of various
constituencies who have a critical interest in and impact on the
company’s performance
E. Marketing Control
i. Annual-plan control ensures the company achieves sales, profits and
other goals established in its annual plan
ii. Profitability control determines whether to expand, reduce, or
eliminate any products or marketing activities
iii. Efficiency control helps the company look at better ways to manage
marketing spending and investments
iv. Strategic control periodically reassesses the strategic approach to the
marketplace using a marketing audit, which covers the
macroenvironment, task environment, marketing strategy, marketing
organization, marketing systems, marketing productivity, and
marketing functions
Loading page 17...
LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1. What are the components of a modern marketing information system?
2. How can companies collect marketing intelligence?
3. What constitutes good marketing research?
4. How can companies accurately measure and forecast market demand?
5. What are some influential developments in the macroenvironment?
EXECUTIVE SUMMARY
Marketing managers need a marketing information system (MIS) to assess
information needs, develop the needed information, and distribute it in a timely manner. An
MIS relies on: (a) an internal records system, including information about the order-to-
payment cycle and sales information systems; (b) a marketing intelligence system to obtain
everyday information about the marketing environment; and (c) a marketing research system.
The marketing research process consists of six steps: define the problem and objectives,
develop the plan, collect the data, analyze the data, present the findings, and make the
decision. Companies use forecasting and demand measurement to evaluate the size, growth,
and profit potential of each new opportunity.
Marketers must monitor sixe major environmental forces: demographic, economic,
sociocultural, natural, technological, and political-legal. In the demographic environment,
they should examine worldwide population growth; mixes of age, ethnic composition, and
educational levels; and household patterns. In the economic arena, they should focus on
consumer psychology, income distribution, and levels of savings, debt, and credit. In the
socialcultural arena, marketers must understand people’s views of themselves, others,
organizations, society, nature, and the universe, as well as the role of cultural values and
subcultures. In the natural environment, marketers should be aware increased concern about
the natural environment and sustainability. In the technological arena, marketers should
examine the accelerating pace of change, opportunities for innovation, varying R&D budgets,
and the increased regulation. In the political-legal environment, marketers must work within
the many laws regulating business practices and with various special-interest groups.
C H A P T E R
3 CAPTURING
MARKETING
INSIGHTS AND
FORECASTING
DEMAND
In this chapter, we will address the following questions:
1. What are the components of a modern marketing information system?
2. How can companies collect marketing intelligence?
3. What constitutes good marketing research?
4. How can companies accurately measure and forecast market demand?
5. What are some influential developments in the macroenvironment?
EXECUTIVE SUMMARY
Marketing managers need a marketing information system (MIS) to assess
information needs, develop the needed information, and distribute it in a timely manner. An
MIS relies on: (a) an internal records system, including information about the order-to-
payment cycle and sales information systems; (b) a marketing intelligence system to obtain
everyday information about the marketing environment; and (c) a marketing research system.
The marketing research process consists of six steps: define the problem and objectives,
develop the plan, collect the data, analyze the data, present the findings, and make the
decision. Companies use forecasting and demand measurement to evaluate the size, growth,
and profit potential of each new opportunity.
Marketers must monitor sixe major environmental forces: demographic, economic,
sociocultural, natural, technological, and political-legal. In the demographic environment,
they should examine worldwide population growth; mixes of age, ethnic composition, and
educational levels; and household patterns. In the economic arena, they should focus on
consumer psychology, income distribution, and levels of savings, debt, and credit. In the
socialcultural arena, marketers must understand people’s views of themselves, others,
organizations, society, nature, and the universe, as well as the role of cultural values and
subcultures. In the natural environment, marketers should be aware increased concern about
the natural environment and sustainability. In the technological arena, marketers should
examine the accelerating pace of change, opportunities for innovation, varying R&D budgets,
and the increased regulation. In the political-legal environment, marketers must work within
the many laws regulating business practices and with various special-interest groups.
C H A P T E R
3 CAPTURING
MARKETING
INSIGHTS AND
FORECASTING
DEMAND
Loading page 18...
OPENING THOUGHT
Students new to the discipline of marketing will probably be surprised at the level of
marketing information, intelligence, and arenas that marketing managers must operate within.
The instructor is encouraged to stress that the marketing of products/services and the processes
of making marketing decisions do not operate without careful consideration of the
environments identified in this chapter. Today, marketers must be cognizant of “how” their
product or service is perceived as much as “how” it functions.
The instructor’s challenge for this chapter is to communicate to the students the complexity of
and sometimes the conflicting forces impacting marketing managers in the today’s
environment.
ASSIGNMENTS
Using information from the web like FEDSTATS and the U.S. Census Bureau, have the
students predict the population of the U.S. for the years 2020, and 2060 and specifically
answer the following questions: a) What is the demographic makeup of the U.S. in these
years? b) What is the age dispersion in the U.S. in these years, and c) What industries do you
see benefiting/losing within the U.S. because of these population figures.
Obesity has been officially called an epidemic. In small groups, have the students collect, from
the university or college administrators, information about the students eating habits (on
campus students would be one group; commuting students another group), exercise, and
lifestyle. For example, how many students (as a percentage of the total student population)
regularly take advantage of the available exercise facilities? How many students presently on
campus are clinically obese? This is a very good project to demonstrate the skill of data
mining and the use of secondary data.
Select or suggest a current “fad” or “trend” exhibited by students on campus. Each student is
to select either a fad or trend and then research this fad and trend in light of the marketing
opportunities present. Would a firm be successful in capitalizing on this “fad?” If so, why?
Should companies capitalize on this “trend”—What are the “upsides” for producing products
that are currently “trendy?” What are the “downsides?” What generation do these fads and
trends appeal to? How large is the potential market for the fad and/or trend? Students should
prepare a report with as much detail into the specific characteristics of these markets as is
available. This is a good secondary data and data mining assignment.
Each student is a member of an identifiable ethic and demographic segment of society. As an
individual assignment, ask each student to describe their sub-segment in terms of population,
age distribution, growth potential, income, education levels, and other demographic
characteristics. The conclusion of their report should explain the marketing implications of
their findings in terms of potential market, over-saturated market, declining market, or hidden
or ignored market with potential.
Ask students to contact a local marketing research firm in the area for the purpose of an
interview regarding research techniques, methods, and the difficulties in conducting research.
Pre-approve the set of questions prepared by the students prior to the appointment. Ensure that
Students new to the discipline of marketing will probably be surprised at the level of
marketing information, intelligence, and arenas that marketing managers must operate within.
The instructor is encouraged to stress that the marketing of products/services and the processes
of making marketing decisions do not operate without careful consideration of the
environments identified in this chapter. Today, marketers must be cognizant of “how” their
product or service is perceived as much as “how” it functions.
The instructor’s challenge for this chapter is to communicate to the students the complexity of
and sometimes the conflicting forces impacting marketing managers in the today’s
environment.
ASSIGNMENTS
Using information from the web like FEDSTATS and the U.S. Census Bureau, have the
students predict the population of the U.S. for the years 2020, and 2060 and specifically
answer the following questions: a) What is the demographic makeup of the U.S. in these
years? b) What is the age dispersion in the U.S. in these years, and c) What industries do you
see benefiting/losing within the U.S. because of these population figures.
Obesity has been officially called an epidemic. In small groups, have the students collect, from
the university or college administrators, information about the students eating habits (on
campus students would be one group; commuting students another group), exercise, and
lifestyle. For example, how many students (as a percentage of the total student population)
regularly take advantage of the available exercise facilities? How many students presently on
campus are clinically obese? This is a very good project to demonstrate the skill of data
mining and the use of secondary data.
Select or suggest a current “fad” or “trend” exhibited by students on campus. Each student is
to select either a fad or trend and then research this fad and trend in light of the marketing
opportunities present. Would a firm be successful in capitalizing on this “fad?” If so, why?
Should companies capitalize on this “trend”—What are the “upsides” for producing products
that are currently “trendy?” What are the “downsides?” What generation do these fads and
trends appeal to? How large is the potential market for the fad and/or trend? Students should
prepare a report with as much detail into the specific characteristics of these markets as is
available. This is a good secondary data and data mining assignment.
Each student is a member of an identifiable ethic and demographic segment of society. As an
individual assignment, ask each student to describe their sub-segment in terms of population,
age distribution, growth potential, income, education levels, and other demographic
characteristics. The conclusion of their report should explain the marketing implications of
their findings in terms of potential market, over-saturated market, declining market, or hidden
or ignored market with potential.
Ask students to contact a local marketing research firm in the area for the purpose of an
interview regarding research techniques, methods, and the difficulties in conducting research.
Pre-approve the set of questions prepared by the students prior to the appointment. Ensure that
Loading page 19...
the students will be able to collect information from the research company regarding how
information is collected. Once it is collected, what are some of the difficulties faced by the
researcher in presenting this information to the client?
Have students watch this video on the concept of “neuromarketing” and comment on whether
such brain research is ethical or not ethical because such research may lead to more marketing
manipulation: http://www.businessweek.com/videos/2013-04-26/neuromarketing-explaining-
the-brains-buy-button See also http://www.businessweek.com/articles/2013-10-10/will-
companies-one-day-use-brainwaves-to-find-ideal-prices Carolyn Yoon, Angela H. Gutchess,
Fred Feinberg, and Thad A. Polk, “A Functional Magnetic Resonance Imaging Study of
Neural Dissociations between Brand and Person Judgments,” Journal of Consumer Research,
33 (June 2006), pp. 31-40; Samuel M. McClure, Jian Li, Damon Tomlin, Kim S. Cypert,
Latané M. Montague, and P. Read Montague, “Neural Correlates of Behavioral Preference for
Culturally Familiar Drinks,” Neuron, 44 (October 14, 2004), pp. 379-387
DETAILED CHAPTER OUTLINE
Opening vignette: Marketers need up-to-date information to make marketing decisions.
Campbell attempted to understand macroenvironmental trends to boost soup sales among
millenials.
I. The Marketing Information System and Marketing Intelligence
A. Marketers are responsible for identifying significant marketplace changes
i. They have disciplined methods for collecting information
ii. The spend time interacting with customers and observing competitors
and other outside groups
B. Some firms have marketing information systems that provide details about
buyer wants, preferences and behavior
i. A marketing information system consists of people, equipment and
procedures to gather, sort, analyze, evaluate and distribute needed,
timely and accurate information to marketing decision makers.
ii. A marketing information system relies on internal company records,
marketing intelligence activities, and marketing research
C. Internal Records and Database systems
i. The Order-to-Payment Cycle, which is the heart of the internal records
system, includes invoices, shipping and billing documents
ii. Sales Information Systems include sales and inventory data
iii. Databases, Data Warehouses, and Data Mining provide information
that enables customer engagement, but present challenges because data
cannot be effectively managed with traditional database and business
intelligence tools
1. Database marketing is the process of building, maintaining and
using customer databases and other databases to contact,
transact with, and build relationships with customers
2. A data warehouse captures information and organizes it so it
information is collected. Once it is collected, what are some of the difficulties faced by the
researcher in presenting this information to the client?
Have students watch this video on the concept of “neuromarketing” and comment on whether
such brain research is ethical or not ethical because such research may lead to more marketing
manipulation: http://www.businessweek.com/videos/2013-04-26/neuromarketing-explaining-
the-brains-buy-button See also http://www.businessweek.com/articles/2013-10-10/will-
companies-one-day-use-brainwaves-to-find-ideal-prices Carolyn Yoon, Angela H. Gutchess,
Fred Feinberg, and Thad A. Polk, “A Functional Magnetic Resonance Imaging Study of
Neural Dissociations between Brand and Person Judgments,” Journal of Consumer Research,
33 (June 2006), pp. 31-40; Samuel M. McClure, Jian Li, Damon Tomlin, Kim S. Cypert,
Latané M. Montague, and P. Read Montague, “Neural Correlates of Behavioral Preference for
Culturally Familiar Drinks,” Neuron, 44 (October 14, 2004), pp. 379-387
DETAILED CHAPTER OUTLINE
Opening vignette: Marketers need up-to-date information to make marketing decisions.
Campbell attempted to understand macroenvironmental trends to boost soup sales among
millenials.
I. The Marketing Information System and Marketing Intelligence
A. Marketers are responsible for identifying significant marketplace changes
i. They have disciplined methods for collecting information
ii. The spend time interacting with customers and observing competitors
and other outside groups
B. Some firms have marketing information systems that provide details about
buyer wants, preferences and behavior
i. A marketing information system consists of people, equipment and
procedures to gather, sort, analyze, evaluate and distribute needed,
timely and accurate information to marketing decision makers.
ii. A marketing information system relies on internal company records,
marketing intelligence activities, and marketing research
C. Internal Records and Database systems
i. The Order-to-Payment Cycle, which is the heart of the internal records
system, includes invoices, shipping and billing documents
ii. Sales Information Systems include sales and inventory data
iii. Databases, Data Warehouses, and Data Mining provide information
that enables customer engagement, but present challenges because data
cannot be effectively managed with traditional database and business
intelligence tools
1. Database marketing is the process of building, maintaining and
using customer databases and other databases to contact,
transact with, and build relationships with customers
2. A data warehouse captures information and organizes it so it
Loading page 20...
can be captures, queried and analyzed to draw inferences about
individual customers’ needs and responses
3. Data mining is used to extract useful insights from the mass of
data
iv. Behavioral targeting is used to track customers’ online behavior for
marketing purposes and allows advertisers to better target online ads
D. Marketing Intelligence
i. A marketing intelligence system is a set of procedures and sources that
managers use to obtain everyday information about developments in the
marketing environment.
ii. It reports “happenings” data from books, newspapers, trade
publications, customers, suppliers, distributors, managers and social
media monitoring
II. The Marketing Research System
A. Marketing research generates insights that aid management decision making
B. Marketing insights provide diagnostic information about how consumers and
markets behave, why we observe certain effects in the marketplace and what that
means to marketers
C. Defining Marketing Research
i. Marketing research is “the function that links the consumer, customer, and
public to the marketer through information – information used to identify
and define marketing opportunities and problems; generate, refine, and
evaluate marketing actions; monitor marketing performance; and improve
understanding of marketing as a process.
ii. Marketing research firms fall into three categories:
1. Syndicated-service research firms
2. Custom marketing research firms
3. Specialty-line marketing research firms
D. The Marketing Research Process
i. Good marketers adopt a formal marketing research process that follows six
steps.
ii. American Airlines example
E. Step 1: Define the Problem, Decision Alternatives, and Research Objectives
i. Do not define the problem too broadly or too narrowly
ii. Some research is exploratory – the goal is to identify the problem and to
suggest possible solutions
iii. Some research is descriptive – it seeks to quantify demand
iv. Some research is causal – it tests a cause-and-effect relationship
F. Step 2: Develop the Research Plan
i. Data Sources
1. Secondary data – collected for another purpose; already exists
2. Primary data – freshly gathered for a specific purpose or project
ii. Research Approaches
1. Observational research
a. Ethnographic research
2. Focus group research
individual customers’ needs and responses
3. Data mining is used to extract useful insights from the mass of
data
iv. Behavioral targeting is used to track customers’ online behavior for
marketing purposes and allows advertisers to better target online ads
D. Marketing Intelligence
i. A marketing intelligence system is a set of procedures and sources that
managers use to obtain everyday information about developments in the
marketing environment.
ii. It reports “happenings” data from books, newspapers, trade
publications, customers, suppliers, distributors, managers and social
media monitoring
II. The Marketing Research System
A. Marketing research generates insights that aid management decision making
B. Marketing insights provide diagnostic information about how consumers and
markets behave, why we observe certain effects in the marketplace and what that
means to marketers
C. Defining Marketing Research
i. Marketing research is “the function that links the consumer, customer, and
public to the marketer through information – information used to identify
and define marketing opportunities and problems; generate, refine, and
evaluate marketing actions; monitor marketing performance; and improve
understanding of marketing as a process.
ii. Marketing research firms fall into three categories:
1. Syndicated-service research firms
2. Custom marketing research firms
3. Specialty-line marketing research firms
D. The Marketing Research Process
i. Good marketers adopt a formal marketing research process that follows six
steps.
ii. American Airlines example
E. Step 1: Define the Problem, Decision Alternatives, and Research Objectives
i. Do not define the problem too broadly or too narrowly
ii. Some research is exploratory – the goal is to identify the problem and to
suggest possible solutions
iii. Some research is descriptive – it seeks to quantify demand
iv. Some research is causal – it tests a cause-and-effect relationship
F. Step 2: Develop the Research Plan
i. Data Sources
1. Secondary data – collected for another purpose; already exists
2. Primary data – freshly gathered for a specific purpose or project
ii. Research Approaches
1. Observational research
a. Ethnographic research
2. Focus group research
Loading page 21...
3. Survey research
4. Behavioral data
5. Experimental research
iii. Research Instruments
1. Questionnaires
2. Closed-end questions specify all possible answers
3. Open-end questions allow respondents to answer in their own
words
4. Qualitative measures
5. Technological devices
iv. Sampling Plan
1. Sampling unit: Whom should we survey?
2. Sample size: How many people should we survey?
3. Sampling procedure: How should we choose the respondents?
v. Contact Methods
1. Mail contacts
2. Telephone contacts
3. Personal contacts
4. Online contacts
G. Step 3: Collect the Data
i. Most expensive and error-prone phase
H. Step 4: Analyze the Information
i. Extract findings by tabulating the data and developing summary measures
ii. Test hypotheses and theories, applying sensitivity analysis to test
assumptions/strength of conclusions
I. Step 5: Present the Findings
J. Step 6: Make the Decision
III. Forecasting and Demand Measurement
A. The company must measure and forecast the size, growth and profit potential
of each new opportunity
B. Sales forecasts are used by finance to raise cash for investment and
operations, by manufacturing to establish capacity and output, by purchasing
to acquire the right amount of supplies, by human resources to hire the needed
workers
C. The Measures of Market Demand
i. Potential market: sufficient interest in market offer (becomes a market
if sufficient income and access)
ii. Available market: interest, income and access to a particular offer
1. Qualified available market: interest, income, access and
qualifications for the market offer
iii. Target market: part of the qualified available market the company
decides to pursue
iv. Penetrated market: set of consumers who are buying the company’s
product
D. The Market Demand Function
i. Market demand for a product is the total volume that would be bought
4. Behavioral data
5. Experimental research
iii. Research Instruments
1. Questionnaires
2. Closed-end questions specify all possible answers
3. Open-end questions allow respondents to answer in their own
words
4. Qualitative measures
5. Technological devices
iv. Sampling Plan
1. Sampling unit: Whom should we survey?
2. Sample size: How many people should we survey?
3. Sampling procedure: How should we choose the respondents?
v. Contact Methods
1. Mail contacts
2. Telephone contacts
3. Personal contacts
4. Online contacts
G. Step 3: Collect the Data
i. Most expensive and error-prone phase
H. Step 4: Analyze the Information
i. Extract findings by tabulating the data and developing summary measures
ii. Test hypotheses and theories, applying sensitivity analysis to test
assumptions/strength of conclusions
I. Step 5: Present the Findings
J. Step 6: Make the Decision
III. Forecasting and Demand Measurement
A. The company must measure and forecast the size, growth and profit potential
of each new opportunity
B. Sales forecasts are used by finance to raise cash for investment and
operations, by manufacturing to establish capacity and output, by purchasing
to acquire the right amount of supplies, by human resources to hire the needed
workers
C. The Measures of Market Demand
i. Potential market: sufficient interest in market offer (becomes a market
if sufficient income and access)
ii. Available market: interest, income and access to a particular offer
1. Qualified available market: interest, income, access and
qualifications for the market offer
iii. Target market: part of the qualified available market the company
decides to pursue
iv. Penetrated market: set of consumers who are buying the company’s
product
D. The Market Demand Function
i. Market demand for a product is the total volume that would be bought
Loading page 22...
by a defined customer group in a defined geographical area in a defined
time period in a defined marketing environment under a defined
marketing program.
ii. Market demand is a function of the stated conditions.
iii. The market minimum would take place without any demand-
stimulating expenditures; higher expenditures would yield higher levels
of demand, first at an increasing rate, then at a decreasing rate.
iv. Market potential is the upper limit.
v. Markets and Market Potential
1. Two extreme types of markets: expansible and nonexpansible
2. The market size is the level of primary demand for the product
class.
3. Market share is the selective demand for a particular product.
4. Market forecast is the market demand corresponding to the
actual marketing expenditure.
5. Market potential is the limit approached by market demand as
industry marketing expenditures approach infinity for a given
marketing environment.
vi. Company Demand and Sales Forecast
1. Company demand is the company’s estimated share of market
demand at alternative levels of company marketing effort
during a given period.
2. Company sales forecast is the expected level of company sales
based on a chosen marketing plan and an assumed marketing
environment.
3. Sales quota is the sales goal set for a product line, company
division, or sales representative.
4. Sales budget is a conservative estimate of the expected volume
of sales.
5. Company sales potential is the sales limit approached by
company demand as company marketing effort increases
relative to that of competitors.
E. Estimating Current Demand
i. Total Market Potential
1. The maximum sales available to all firms in an industry during
a given period, under a given level of industry marketing effort
and environmental conditions.
2. A common way to estimate it is to multiply potential buyers by
the average quantity each purchases and then by the price.
3. The most difficult component to estimate is number of buyers.
ii. Area Market Potential
1. Allocates the marketing budget optimally among the best
territories
2. Market-buildup method identifies all the potential buyers in
each market and estimates their potential purchases
3. The North American Industry Classification System (NAICS)
time period in a defined marketing environment under a defined
marketing program.
ii. Market demand is a function of the stated conditions.
iii. The market minimum would take place without any demand-
stimulating expenditures; higher expenditures would yield higher levels
of demand, first at an increasing rate, then at a decreasing rate.
iv. Market potential is the upper limit.
v. Markets and Market Potential
1. Two extreme types of markets: expansible and nonexpansible
2. The market size is the level of primary demand for the product
class.
3. Market share is the selective demand for a particular product.
4. Market forecast is the market demand corresponding to the
actual marketing expenditure.
5. Market potential is the limit approached by market demand as
industry marketing expenditures approach infinity for a given
marketing environment.
vi. Company Demand and Sales Forecast
1. Company demand is the company’s estimated share of market
demand at alternative levels of company marketing effort
during a given period.
2. Company sales forecast is the expected level of company sales
based on a chosen marketing plan and an assumed marketing
environment.
3. Sales quota is the sales goal set for a product line, company
division, or sales representative.
4. Sales budget is a conservative estimate of the expected volume
of sales.
5. Company sales potential is the sales limit approached by
company demand as company marketing effort increases
relative to that of competitors.
E. Estimating Current Demand
i. Total Market Potential
1. The maximum sales available to all firms in an industry during
a given period, under a given level of industry marketing effort
and environmental conditions.
2. A common way to estimate it is to multiply potential buyers by
the average quantity each purchases and then by the price.
3. The most difficult component to estimate is number of buyers.
ii. Area Market Potential
1. Allocates the marketing budget optimally among the best
territories
2. Market-buildup method identifies all the potential buyers in
each market and estimates their potential purchases
3. The North American Industry Classification System (NAICS)
Loading page 23...
provides an efficient method of estimating area market
potentials
4. Multiple-factor index method incorporates things like
promotional expenditures and competitors
iii. Industry Sales and Market Shares
1. Means finding out competitors and estimating their
sales/evaluating performance against the industry’s
performance.
F. Estimating Future Demand
i. Forecasting is the art of anticipating what buyers are likely to do under
a given set of conditions
ii. The macroeconomic forecast projects inflation, unemployment, interest
rates, consumer spending, business investment, government
expenditures, net exports, and other variables (forecasts GDP)
iii. They buy forecasts from someone else
iv. They build a forecast on what people say, what people do, or what
people have done
1. Survey of buyers’ intentions
2. Ask the sales force
3. Expert opinion
4. Past-sales analysis
5. Market-test method
IV. Analyzing the Macroenvironment
A. A trend is a direction or sequence of events with momentum and durability,
revealing the shape of the future.
B. A fad is a craze that is unpredictable, short-lived, without long-term
significance.
C. Identifying the Major Forces
i. Demographic environment
ii. Economic environment
iii. Socio-cultural environment
iv. Natural environment
v. Technological environment
vi. Political-legal environment
D. The Demographic Environment
i. Population size and growth, rate in cities, regions and nations, age
distribution and ethnic mix, educational levels, household patterns
ii. Worldwide Population Growth
1. Population growth fastest in developing regions
iii. Population Age Mix
1. Global trend toward the aging population
2. Six age groups
a. Preschool children
b. School-age children
c. Teens
d. Young adults 20-40
potentials
4. Multiple-factor index method incorporates things like
promotional expenditures and competitors
iii. Industry Sales and Market Shares
1. Means finding out competitors and estimating their
sales/evaluating performance against the industry’s
performance.
F. Estimating Future Demand
i. Forecasting is the art of anticipating what buyers are likely to do under
a given set of conditions
ii. The macroeconomic forecast projects inflation, unemployment, interest
rates, consumer spending, business investment, government
expenditures, net exports, and other variables (forecasts GDP)
iii. They buy forecasts from someone else
iv. They build a forecast on what people say, what people do, or what
people have done
1. Survey of buyers’ intentions
2. Ask the sales force
3. Expert opinion
4. Past-sales analysis
5. Market-test method
IV. Analyzing the Macroenvironment
A. A trend is a direction or sequence of events with momentum and durability,
revealing the shape of the future.
B. A fad is a craze that is unpredictable, short-lived, without long-term
significance.
C. Identifying the Major Forces
i. Demographic environment
ii. Economic environment
iii. Socio-cultural environment
iv. Natural environment
v. Technological environment
vi. Political-legal environment
D. The Demographic Environment
i. Population size and growth, rate in cities, regions and nations, age
distribution and ethnic mix, educational levels, household patterns
ii. Worldwide Population Growth
1. Population growth fastest in developing regions
iii. Population Age Mix
1. Global trend toward the aging population
2. Six age groups
a. Preschool children
b. School-age children
c. Teens
d. Young adults 20-40
Loading page 24...
e. Middle-aged adults 40-65
f. Older adults 65+
3. Cohorts are groups of individuals born during the same time
period who travel through life together.
iv. Diversity within Markets
1. Ethic and racial diversity varies across countries
v. Educational Groups
1. Illiterates
2. High school dropouts
3. High school diplomas
4. College degrees
5. Professional degrees
vi. Household Patterns
1. Each type of household has distinctive needs and buying
habots that marketers need to study and understand.
E. The Economic Environment
i. Purchasing power depends on income, savings, debt, credit availability,
and price.
ii. Consumer Psychology
1. Consumers have been shaken by the recession, have more debt
and less savings, and feel it will change their behavior, to be
more risk averse, going forward.
iii. Income Distribution
1. Four types of industrial structures
a. Subsistence economies
b. Raw-material-exporting economies
c. Industrializing economies
d. Industrial economies
2. Five income-distribution patterns
a. Very low incomes
b. Mostly low incomes
c. Very low, very high incomes
d. Low, medium, high incomes
e. Mostly medium incomes
iv. Income, Savings, Debt, and Credit
1. U.S. consumers have high debt-to-income ratio, which slows
expenditures on housing and large-ticket items.
2. Consumer borrowing dropped for the first time in two decades
during the recession because credit was less available.
3. Manufacturers and service jobs are migrating offshore.
F. The Sociocultural Environment
i. Impacts consumption trends and behavior, including: views of
ourselves, others, organizations, society, nature, and of the universe.
ii. Core Cultural Values
1. Core beliefs and values are passed from parents to children and
reinforced by social institutions
f. Older adults 65+
3. Cohorts are groups of individuals born during the same time
period who travel through life together.
iv. Diversity within Markets
1. Ethic and racial diversity varies across countries
v. Educational Groups
1. Illiterates
2. High school dropouts
3. High school diplomas
4. College degrees
5. Professional degrees
vi. Household Patterns
1. Each type of household has distinctive needs and buying
habots that marketers need to study and understand.
E. The Economic Environment
i. Purchasing power depends on income, savings, debt, credit availability,
and price.
ii. Consumer Psychology
1. Consumers have been shaken by the recession, have more debt
and less savings, and feel it will change their behavior, to be
more risk averse, going forward.
iii. Income Distribution
1. Four types of industrial structures
a. Subsistence economies
b. Raw-material-exporting economies
c. Industrializing economies
d. Industrial economies
2. Five income-distribution patterns
a. Very low incomes
b. Mostly low incomes
c. Very low, very high incomes
d. Low, medium, high incomes
e. Mostly medium incomes
iv. Income, Savings, Debt, and Credit
1. U.S. consumers have high debt-to-income ratio, which slows
expenditures on housing and large-ticket items.
2. Consumer borrowing dropped for the first time in two decades
during the recession because credit was less available.
3. Manufacturers and service jobs are migrating offshore.
F. The Sociocultural Environment
i. Impacts consumption trends and behavior, including: views of
ourselves, others, organizations, society, nature, and of the universe.
ii. Core Cultural Values
1. Core beliefs and values are passed from parents to children and
reinforced by social institutions
Loading page 25...
2. Secondary beliefs and values are more open to change
iii. Subcultures
1. Groups with shared values, beliefs, preferences and behaviors
emerging from their special life experiences or circumstances
G. The Natural Environment
i. There are opportunities for those who can reconcile prosperity and
environmental protection.
ii. Corporate environmentalism recognizes the need to integrate
environmental issues into the firm’s strategic plans.
iii. Trends to be aware of include the shortage of raw materials, especially
water; the increased cost of energy; increased pollution levels; and the
changing role of governments.
iv. Firms whose products require finite nonrenewable resources face
substantial cost increases as depletion approaches.
H. The Technological Environment
i. Accelerating pace of technological change
ii. Unlimited opportunities for innovation
iii. Varying R&D budgets
iv. Increased regulation of technological change
I. The Political-Legal Environment
i. Laws, government agencies and pressure groups that influence
organizations and individuals create business opportunities or
uncertainty/confusion
ii. Increased Business Legislation
1. Intended to protect companies from unfair competition, protect
consumers from unfair business practices, protect society from
unbridled business behavior, and charge businesses with the
social costs of their products or production processes.
iii. Growth of Special Interest Groups
1. Political action committees (PACs) lobby government and
pressure businesses to respect the rights of consumers, women,
seniors, and gays and lesbians.
2. Consumerist movement organized citizens and government to
strengthen the rights and powers of buyers in relationship to
sellers.
iii. Subcultures
1. Groups with shared values, beliefs, preferences and behaviors
emerging from their special life experiences or circumstances
G. The Natural Environment
i. There are opportunities for those who can reconcile prosperity and
environmental protection.
ii. Corporate environmentalism recognizes the need to integrate
environmental issues into the firm’s strategic plans.
iii. Trends to be aware of include the shortage of raw materials, especially
water; the increased cost of energy; increased pollution levels; and the
changing role of governments.
iv. Firms whose products require finite nonrenewable resources face
substantial cost increases as depletion approaches.
H. The Technological Environment
i. Accelerating pace of technological change
ii. Unlimited opportunities for innovation
iii. Varying R&D budgets
iv. Increased regulation of technological change
I. The Political-Legal Environment
i. Laws, government agencies and pressure groups that influence
organizations and individuals create business opportunities or
uncertainty/confusion
ii. Increased Business Legislation
1. Intended to protect companies from unfair competition, protect
consumers from unfair business practices, protect society from
unbridled business behavior, and charge businesses with the
social costs of their products or production processes.
iii. Growth of Special Interest Groups
1. Political action committees (PACs) lobby government and
pressure businesses to respect the rights of consumers, women,
seniors, and gays and lesbians.
2. Consumerist movement organized citizens and government to
strengthen the rights and powers of buyers in relationship to
sellers.
Loading page 26...
LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1. How can companies deliver customer value, satisfaction, and loyalty?
2. What is the lifetime value of customers, and how can marketers maximize it?
3. How can companies attract and retain the right customers and cultivate strong
customer relationships and communities?
EXECUTIVE SUMMARY
Customers will buy from the firm that they perceive to offer the highest customer-
delivered value, defined as the difference between total customer benefits and total
customer cost. A buyer’s satisfaction is a function of the product’s perceived
performance and the buyer’s expectations. Recognizing that high satisfaction leads to
high customer loyalty, companies must ensure that they meet and exceed customer
expectations. Quality is the totality of features and characteristics of a product or service
that bear on its ability to satisfy stated or implied needs. Marketers play a key role in
achieving high levels of total quality so that firms remain solvent and profitable.
Marketing managers must calculate customer lifetime values of their customer
base to understand their profit implications. They must also determine ways to increase
the value of the customer base and provide inspiration and feedback for product
improvements or innovations. Companies are also becoming skilled in customer
relationship management (CRM). The purpose is to attract the right customers, meet the
individual needs of valued customers, improve loyalty and retention of valued customers,
and implement win-back strategies to reattract valued ex-customers.
OPENING THOUGHT
Although most students understand the concept of “buying,” some will have difficulty in
understanding the differences between total customer value and total customer cost. It will be
beneficial for long-term understanding and retention to cover what the definition is and what it
is not. Secondly, the distinction between satisfaction and total customer satisfaction for the
consumer might be challenging for some students. Some students may have a hard time
understanding the distinction between perception and expectation. Finally, it might be
necessary to reemphasize the concepts of Customer Relationship Management (CRM),
customer databases, and database mining often in the lecture. Students may confuse the
concept of mailing lists with databases. However, most of the students today are proficient in
C H A P T E R
4 CREATING LONG-TERM
LOYALTY
RELATIONSHIPS
In this chapter, we will address the following questions:
1. How can companies deliver customer value, satisfaction, and loyalty?
2. What is the lifetime value of customers, and how can marketers maximize it?
3. How can companies attract and retain the right customers and cultivate strong
customer relationships and communities?
EXECUTIVE SUMMARY
Customers will buy from the firm that they perceive to offer the highest customer-
delivered value, defined as the difference between total customer benefits and total
customer cost. A buyer’s satisfaction is a function of the product’s perceived
performance and the buyer’s expectations. Recognizing that high satisfaction leads to
high customer loyalty, companies must ensure that they meet and exceed customer
expectations. Quality is the totality of features and characteristics of a product or service
that bear on its ability to satisfy stated or implied needs. Marketers play a key role in
achieving high levels of total quality so that firms remain solvent and profitable.
Marketing managers must calculate customer lifetime values of their customer
base to understand their profit implications. They must also determine ways to increase
the value of the customer base and provide inspiration and feedback for product
improvements or innovations. Companies are also becoming skilled in customer
relationship management (CRM). The purpose is to attract the right customers, meet the
individual needs of valued customers, improve loyalty and retention of valued customers,
and implement win-back strategies to reattract valued ex-customers.
OPENING THOUGHT
Although most students understand the concept of “buying,” some will have difficulty in
understanding the differences between total customer value and total customer cost. It will be
beneficial for long-term understanding and retention to cover what the definition is and what it
is not. Secondly, the distinction between satisfaction and total customer satisfaction for the
consumer might be challenging for some students. Some students may have a hard time
understanding the distinction between perception and expectation. Finally, it might be
necessary to reemphasize the concepts of Customer Relationship Management (CRM),
customer databases, and database mining often in the lecture. Students may confuse the
concept of mailing lists with databases. However, most of the students today are proficient in
C H A P T E R
4 CREATING LONG-TERM
LOYALTY
RELATIONSHIPS
Loading page 27...
Internet usage and can cite examples of relationship marketing from their own favorite
Internet sites such as Amazon.com.
ASSIGNMENTS
Key manufacturers and others must be concerned with how customers view products
(customer satisfaction perceptions) being disseminated throughout the “electronic world” via
the Internet. No longer can one discount the “power of the mouse” for affecting potential
customers. In small groups, students are to select a particular firm or product and are to
research what is being said on the Internet regarding this company/product. What
affects/effects does this type of dissemination of consumer opinions via the Internet have on
the company’s marketing strategies? What can the company do to stem the tide of such
comments? How does a company defend itself against blatantly untrue consumer opinions?
Have each of the students read 1 Michael Tsiros, Vikas Mittal, William T. Ross Jr., “The
Role of Attributions in Customer Satisfaction: A Reexamination,” Journal of Consumer
Research, 31 (September), 2004, pp. 476-483 and comment on their findings.
Customer relationship management is a current business “buzz word.” Students can be
directed to do an Internet research project from named marketing/business journals on the
subject of customer relations management (the chapter’s endnotes can provide a good source
of leads for the students). Each student can be directed to research, read, and compile a report
on their findings from a minimum of five articles from five different marketing (and business
magazines such as Fortune). The student’s report is to comment on how these articles
compare, complement, or contrast the material contained in this chapter.
The research firm J.D. Powers and Associates (jdpower.com) lists eight categories of products
for consumers to research before purchasing the product or service. Breaking up the class into
eight groups, have the students research the top performers for each category and be able to
share their findings as to what characteristics, policies, procedures, and vision these top rated
companies have in common. Is there a “common” link among all of the winners? Are there
differences? In terms of the material contained in this chapter, how would you explain these
similarities and differences?
DETAILED CHAPTER OUTLINE
Opening Vignette: Customer-centered companies are using technology to connect with
customers and build customer relationships. Pandora tracks preferences and makes
recommendations to drive customer preference for its service and loyalty.
I. Building Customer Value, Satisfaction, and Loyalty
A. Customer-Perceived Value
i. (CPV) is the difference between the prospective customer’s evaluation
of all the benefits and costs of an offering and the perceived
alternatives.
ii. Total customer benefit is the perceived monetary value of the bundle
Internet sites such as Amazon.com.
ASSIGNMENTS
Key manufacturers and others must be concerned with how customers view products
(customer satisfaction perceptions) being disseminated throughout the “electronic world” via
the Internet. No longer can one discount the “power of the mouse” for affecting potential
customers. In small groups, students are to select a particular firm or product and are to
research what is being said on the Internet regarding this company/product. What
affects/effects does this type of dissemination of consumer opinions via the Internet have on
the company’s marketing strategies? What can the company do to stem the tide of such
comments? How does a company defend itself against blatantly untrue consumer opinions?
Have each of the students read 1 Michael Tsiros, Vikas Mittal, William T. Ross Jr., “The
Role of Attributions in Customer Satisfaction: A Reexamination,” Journal of Consumer
Research, 31 (September), 2004, pp. 476-483 and comment on their findings.
Customer relationship management is a current business “buzz word.” Students can be
directed to do an Internet research project from named marketing/business journals on the
subject of customer relations management (the chapter’s endnotes can provide a good source
of leads for the students). Each student can be directed to research, read, and compile a report
on their findings from a minimum of five articles from five different marketing (and business
magazines such as Fortune). The student’s report is to comment on how these articles
compare, complement, or contrast the material contained in this chapter.
The research firm J.D. Powers and Associates (jdpower.com) lists eight categories of products
for consumers to research before purchasing the product or service. Breaking up the class into
eight groups, have the students research the top performers for each category and be able to
share their findings as to what characteristics, policies, procedures, and vision these top rated
companies have in common. Is there a “common” link among all of the winners? Are there
differences? In terms of the material contained in this chapter, how would you explain these
similarities and differences?
DETAILED CHAPTER OUTLINE
Opening Vignette: Customer-centered companies are using technology to connect with
customers and build customer relationships. Pandora tracks preferences and makes
recommendations to drive customer preference for its service and loyalty.
I. Building Customer Value, Satisfaction, and Loyalty
A. Customer-Perceived Value
i. (CPV) is the difference between the prospective customer’s evaluation
of all the benefits and costs of an offering and the perceived
alternatives.
ii. Total customer benefit is the perceived monetary value of the bundle
Loading page 28...
of economic, functional and psychological benefits customers expect
from a given market offering because of the product, service, people,
and image.
iii. Total customer cost is the perceived bundle of costs customers expect
to incur in evaluating, obtaining, using and disposing of the given
market offering, including monetary, time, energy, and psychological
costs.
iv. A firm can improve its value by improving the economic, functional,
and psychological benefits of its product, services, people, and/or
image; it can reduce the buyer’s time, energy, and psychological
investment; it can reduce its product’s monetary cost to the buyer.
v. Loyalty is “a deeply held commitment to rebuy or repatronize a
preferred product or service in the future despite situational influences
and marketing efforts having the potential to cause switching
behavior.”
vi. The value proposition consists of the whole cluster of benefits the
company promises to deliver; it is more than the core positioning of
the offering.
vii. The value delivery system includes all the experiences the customer
will have on the way to obtaining and using the offering. At the heart
of a good value delivery system is a set of core business processes that
help deliver distinctive consumer value.
B. Total Customer Satisfaction
i. Satisfaction is a person’s feeling of pleasure or disappointment that
result from comparing a product or service’s perceived performance
(or outcome) to expectations.
ii. If the performance or experience falls short of expectations, the
customer is dissatisfied.
iii. If it matches expectations, the customer is satisfied.
iv. If it exceeds expectations, the customer is highly satisfied or delighted
v. Customer assessments of product or service performance depend on
many factors, including the type of loyalty relationship the customer
has with the brand.
vi. Although the customer-centered firm seeks to create high customer
satisfaction, increasing customer satisfaction by lowering price or
increasing services may result in lower profits.
C. Monitoring Satisfaction
i. Many companies systematically measure how well they treat
customers, identify factors shaping satisfaction and change operations
and marketing as a result because satisfaction affects retention and
word of mouth.
ii. High satisfaction or delight creates an emotional bond with the brand or
company, not just a rational preference.
iii. The Net Promoter score is a 1-to-10 scale on which to rate their likelihood
of recommending the company.
1. Marketers then subtract Detractors (those who gave a 0 to 6)
from a given market offering because of the product, service, people,
and image.
iii. Total customer cost is the perceived bundle of costs customers expect
to incur in evaluating, obtaining, using and disposing of the given
market offering, including monetary, time, energy, and psychological
costs.
iv. A firm can improve its value by improving the economic, functional,
and psychological benefits of its product, services, people, and/or
image; it can reduce the buyer’s time, energy, and psychological
investment; it can reduce its product’s monetary cost to the buyer.
v. Loyalty is “a deeply held commitment to rebuy or repatronize a
preferred product or service in the future despite situational influences
and marketing efforts having the potential to cause switching
behavior.”
vi. The value proposition consists of the whole cluster of benefits the
company promises to deliver; it is more than the core positioning of
the offering.
vii. The value delivery system includes all the experiences the customer
will have on the way to obtaining and using the offering. At the heart
of a good value delivery system is a set of core business processes that
help deliver distinctive consumer value.
B. Total Customer Satisfaction
i. Satisfaction is a person’s feeling of pleasure or disappointment that
result from comparing a product or service’s perceived performance
(or outcome) to expectations.
ii. If the performance or experience falls short of expectations, the
customer is dissatisfied.
iii. If it matches expectations, the customer is satisfied.
iv. If it exceeds expectations, the customer is highly satisfied or delighted
v. Customer assessments of product or service performance depend on
many factors, including the type of loyalty relationship the customer
has with the brand.
vi. Although the customer-centered firm seeks to create high customer
satisfaction, increasing customer satisfaction by lowering price or
increasing services may result in lower profits.
C. Monitoring Satisfaction
i. Many companies systematically measure how well they treat
customers, identify factors shaping satisfaction and change operations
and marketing as a result because satisfaction affects retention and
word of mouth.
ii. High satisfaction or delight creates an emotional bond with the brand or
company, not just a rational preference.
iii. The Net Promoter score is a 1-to-10 scale on which to rate their likelihood
of recommending the company.
1. Marketers then subtract Detractors (those who gave a 0 to 6)
Loading page 29...
from Promoters (those who gave a 9 or 10) to arrive at the Net
Promoter Score (NPS).
2. Customers who rate the brand with a 7 or 8 are deemed
Passively Satisfied and are not included.
iv. Practices can help companies recover customer goodwill after a
negative experience
1. Set up a seven-day, 24-hour toll-free hotline (by phone, fax, or
e-mail)
2. Contact the complaining customer as quickly as possible.
3. Accept responsibility for the customer’s disappointment; don’t
blame the customer.
4. Use customer service people who are friendly and empathic.
5. Resolve the complaint swiftly and to the customer’s
satisfaction.
D. Product and Service Quality
i. Quality is the totality of features and characteristics of a product or
service that bear on its ability to satisfy stated or implied needs.
ii. Higher levels of quality result in higher levels of customer satisfaction,
which support higher prices and (often) lower costs.
iii. Marketing plays an especially important role in helping companies
identify and deliver high-quality goods and services to target customers.
1. Correctly identify customers’ needs and requirements
2. Communicate customer expectations properly to product
designers
3. Make sure customers’ orders are filled correctly and on time
4. Check that customers have received proper instructions,
training, and technical assistance in the use of the product
5. Stay in touch with customers after the sale to ensure they are,
and remain, satisfied
6. Gather customer ideas for product and service improvements
and convey them to the appropriate departments
II. Maximizing Customer Lifetime Value
A. The 80-20 rule states that 80 percent or more of the company’s profits come
from the top 20 percent of its customers.
B. Customer Profitability
i. A profitable customer is a person, household, or company that over
time yields a revenue stream exceeding by an acceptable amount the
company’s cost stream for attracting, selling, and serving that
customer.
ii. Marketers can assess customer profitability individually, by market
segment, or by channel.
iii. Companies that conduct customer profitability analysis:
1. Can raise the price of its less profitable products or eliminate
them
2. Can try to sell less profitable profit-making products
3. Can ignore unprofitable customers/encourage them to switch to
Promoter Score (NPS).
2. Customers who rate the brand with a 7 or 8 are deemed
Passively Satisfied and are not included.
iv. Practices can help companies recover customer goodwill after a
negative experience
1. Set up a seven-day, 24-hour toll-free hotline (by phone, fax, or
e-mail)
2. Contact the complaining customer as quickly as possible.
3. Accept responsibility for the customer’s disappointment; don’t
blame the customer.
4. Use customer service people who are friendly and empathic.
5. Resolve the complaint swiftly and to the customer’s
satisfaction.
D. Product and Service Quality
i. Quality is the totality of features and characteristics of a product or
service that bear on its ability to satisfy stated or implied needs.
ii. Higher levels of quality result in higher levels of customer satisfaction,
which support higher prices and (often) lower costs.
iii. Marketing plays an especially important role in helping companies
identify and deliver high-quality goods and services to target customers.
1. Correctly identify customers’ needs and requirements
2. Communicate customer expectations properly to product
designers
3. Make sure customers’ orders are filled correctly and on time
4. Check that customers have received proper instructions,
training, and technical assistance in the use of the product
5. Stay in touch with customers after the sale to ensure they are,
and remain, satisfied
6. Gather customer ideas for product and service improvements
and convey them to the appropriate departments
II. Maximizing Customer Lifetime Value
A. The 80-20 rule states that 80 percent or more of the company’s profits come
from the top 20 percent of its customers.
B. Customer Profitability
i. A profitable customer is a person, household, or company that over
time yields a revenue stream exceeding by an acceptable amount the
company’s cost stream for attracting, selling, and serving that
customer.
ii. Marketers can assess customer profitability individually, by market
segment, or by channel.
iii. Companies that conduct customer profitability analysis:
1. Can raise the price of its less profitable products or eliminate
them
2. Can try to sell less profitable profit-making products
3. Can ignore unprofitable customers/encourage them to switch to
Loading page 30...
competitors
iv. Activity-based costing (ABC) accounting tries to identify the real costs
associated with serving each customer and estimates all revenue
coming from the customer, less all costs (including making and
distriuting the products and services, taking phone calls, traveling,
entertainment and gifts, etc.)
C. Measuring Customer Lifetime Value
i. Customer lifetime value (CLV) describes the net present value of the
stream of future profits expected over the customer’s lifetime
purchases.
III. Cultivating Customer Relationships
A. Customer relationship management (CRM) is the process of carefully
managing detailed information about individual customers and all customer
“touch points” to maximize loyalty.
B. CRM enables companies to provide better customer service, personalize
marketing offers, and to market to consumers after gaining their permission.
C. Attracting and Retaining Customers
i. Different acquisition methods yield customers with varying CLVs.
ii. To reduce the customer churn/defection rate, the company must
1. Define and measure its retention rate
2. Distinguish the causes of customer attration and identify those
that can be managed better
3. Compare the lost customer’s lifetime value to the costs of
reducing the defection rate
iii. The marketing funnel identifies the percentage of potential target
market at each stage in the decision process.
1. Firms can calculate conversion rates, or the percentage of
customers at one stage who move to the next
2. Satisfied customers are the company’s customer relationship
capital
iv. Winning companies improve the aggregate value of the customer base
by:
1. Reducing the rate of customer defection
2. Increasing the longevity of the customer relationship
3. Enhancing customer growth through share of wallet, cross-
selling and up-selling
4. Making low-profit customers more profitable or terminating
them
5. Focusing disproportionate effort on high-profit customers
D. Building Loyalty
i. Interact Closely with Customers
ii. Develop Loyalty Programs
1. Frequency programs
2. Club membership programs
iii. Create Institutional Ties
iv. Create Value with Brand Communities
iv. Activity-based costing (ABC) accounting tries to identify the real costs
associated with serving each customer and estimates all revenue
coming from the customer, less all costs (including making and
distriuting the products and services, taking phone calls, traveling,
entertainment and gifts, etc.)
C. Measuring Customer Lifetime Value
i. Customer lifetime value (CLV) describes the net present value of the
stream of future profits expected over the customer’s lifetime
purchases.
III. Cultivating Customer Relationships
A. Customer relationship management (CRM) is the process of carefully
managing detailed information about individual customers and all customer
“touch points” to maximize loyalty.
B. CRM enables companies to provide better customer service, personalize
marketing offers, and to market to consumers after gaining their permission.
C. Attracting and Retaining Customers
i. Different acquisition methods yield customers with varying CLVs.
ii. To reduce the customer churn/defection rate, the company must
1. Define and measure its retention rate
2. Distinguish the causes of customer attration and identify those
that can be managed better
3. Compare the lost customer’s lifetime value to the costs of
reducing the defection rate
iii. The marketing funnel identifies the percentage of potential target
market at each stage in the decision process.
1. Firms can calculate conversion rates, or the percentage of
customers at one stage who move to the next
2. Satisfied customers are the company’s customer relationship
capital
iv. Winning companies improve the aggregate value of the customer base
by:
1. Reducing the rate of customer defection
2. Increasing the longevity of the customer relationship
3. Enhancing customer growth through share of wallet, cross-
selling and up-selling
4. Making low-profit customers more profitable or terminating
them
5. Focusing disproportionate effort on high-profit customers
D. Building Loyalty
i. Interact Closely with Customers
ii. Develop Loyalty Programs
1. Frequency programs
2. Club membership programs
iii. Create Institutional Ties
iv. Create Value with Brand Communities
Loading page 31...
30 more pages available. Scroll down to load them.
Preview Mode
Sign in to access the full document!
100%
Study Now!
XY-Copilot AI
Unlimited Access
Secure Payment
Instant Access
24/7 Support
AI Assistant
Document Details
Subject
Nursing